Like B. B. King but without the guitar, health benefits provider WellPoint is the king of the Blues. Through its subsidiaries, the firm provides health coverage to some 34 million members. One of the largest health insurers in the US, it is a Blue Cross and Blue Shield Association (BCBSA) licensee in more than a dozen states (where it operates under the Anthem, Empire, and BCBS monikers) and provides plans under the Unicare and CareMore names in other parts of the country. Plans include PPO, HMO, indemnity, and hybrid plans offered to employers, individuals, and Medicare and Medicaid recipients. It also provides administrative services to self-insured groups, as well as specialty insurance products.
Despite operating a host of subsidiaries that offer services other than health insurance to millions of customers, premiums from WellPoint's health plans make up the bulk (more than 90%) of its annual sales. The company divides its health plan operations into customer-base segments: The commercial segment includes local groups (regional businesses and organizations) and national accounts (multi-state employers), while the consumer segment includes individuals, seniors, and state-sponsored plans (including Medicaid). Other offerings include BlueCard (for out-of-state employees) and FEP (federal employee plans).
WellPoint's specialty products include dental, vision, long-term care, workers' compensation, and group life and disability insurance. Through several of its subsidiaries, WellPoint also performs claims processing, fraud prevention, cost-control, benefits management, and other administrative tasks for government-run Medicare plans, other insurance firms, and employer groups.
Despite its expansion into other business areas in recent years, WellPoint's Blue-focused expansion efforts in past decades have kept Blue-branded health coverage at the core of the company's business. Many of the company's Blue subsidiaries (including plans in Kentucky, Missouri, Wisconsin, and elsewhere) operate under the name Anthem Blue Cross Blue Shield. Other Blue subsidiaries include Anthem Blue Cross (California), Empire Blue Cross Blue Shield (New York), and Blue Cross Blue Shield of Georgia.
In addition to the Blue subsidiaries, WellPoint's health plan segment includes its Unicare subsidiary, which gives the company the ability to sell group and individual health coverage in geographic areas where it is not a Blue Cross licensee; it operates Unicare throughout the US. Through its subsidiaries, WellPoint is licensed to conduct insurance operations in all 50 states.
Marketing and Sales
WellPoint markets most of its products through a network of independent agents and brokers. The exception comes with the company's national account and large, employer-focused products, which are sold by an in-house sales force and independent brokers.
Increased membership rates, higher FEP reimbursements, and a jump in Medicare enrollment levels led to a 3% rise in WellPoint's revenues in 2011 (from $58.8 billion to $60.7 billion), despite lower enrollment levels in the local and national accounts businesses (largely attributed to economic factors). However, net income dropped by 8% from $2.9 billion to some $2.65 billion that year due to decreased operating results in the consumer segment.
The Medicare market is a significant part of WellPoint's growth strategy: The company anticipates more than 1 million Baby Boomers will become eligible for Medicare every year between 2011 and 2030 in all of WellPoint's Blue-branded states, and it is beefing up its Medicare offerings and expanding into new service territories to prepare for the change.
WellPoint is in the midst of trying to figure out how health care reform will affect the its long-term business model, as it is faced with increased regulation in some areas and potential membership increases from others. As a result, WellPoint is expanding into areas such as online health insurance exchanges and retail businesses. WellPoint has also raised its premium rates in certain market segments (individuals and local groups) to prepare for the costs of enacting health reform measures.
Mergers and Acquisitions
In late 2012 WellPoint made a bold move to expand outside the realm of Blue when it acquired AMERIGROUP, a provider of Medicaid and other state health programs to some 2.7 million members in over a dozen states, for about $4.5 billion. Through the deal, WellPoint widens its state-sponsored health programs to serve some 4.5 million customers in 19 states. By combining the two organizations, WellPoint hopes to reduce expenses and improve the quality of Medicaid services; it also hopes to take advantage of federal reform laws that aim to extend Medicaid coverage. The merger also creates opportunities to provide dual eligibility products (for members that qualify for both Medicare and Medicaid coverage) in over a dozen states.
WellPoint's had previously expanded its non-Blue Medicare operations by acquiring CareMore Health Group in 2011, adding a non-Blue Medicare Advantage provider in Arizona, California, and Nevada. The $800 million deal added about 54,000 Medicare clients to WellPoint's roster; it also added some special needs plan members.
In 2011 WellPoint went in with two not-for-profit insurers -- Health Care Service Corp. and BCBS of Michigan -- to purchase a majority stake in a commercial insurance exchange called Bloom Health, which allows businesses to contribute a certain amount towards the health plans that their employees select for coverage. Federal reform laws require states to eventually form such exchanges, and many private insurers are working to establish their own online marketplaces.
To capitalize on new growth opportunities and further diversify its revenue stream, WellPoint also acquired 1-800 CONTACTS, the largest direct-to-consumer contact lenses retailer in the US, in 2012. Terms of the agreement were not disclosed. – less