Commissioner Complains About Blue Cross Rate Increase

Anthem Blue Cross is imposing a 9.8% premium increase on its small group health insurance policies. Insurance Commissioner Dave Jones is calling the increase unreasonable. “This…is the fourth consecutive rate increase by Anthem on small employers that the Department of Insurance found excessive and unreasonable. Over the last 24 months Anthem has raised rates on members in these small group policies an average of 24.9%. The Department of Insurance’s finding that Anthem’s rate increase is unreasonable is based on Anthem’s excessive return on equity or profits, its excessive pre-tax pricing margin, its unjustified high-pricing trend of 8.6 percent, which includes a prescription drug trend of 21.4%, and its failure to adjust the rate for the better health status of its remaining members. Also, last year, Anthem shifted $75.5 million of income to a premium deficiency reserve. This accounting maneuver was unwarranted and unjustified and decreased Anthem’s reported net income for 2013 and masked the fact that the company’s profit was over 20%. In five out of the last six years Anthem has attained a greater than 20% profit,” Jones said.

ACA Hits Health Insurers in the First-Quarter

Many health insurers’ first-quarter 2014 results were hurt by that fact that their income statement now includes the annual industry fee assessed under the Affordable Care Act (ACA), according to Best. The fee begins at $8 billion in 2014 and increases gradually until reaching $14.3 billion in 2018. Beginning in 2014, health insurance issuers pay an annual fee based on net written premiums. The fee is imposed on health insurers depending on the amount of the issuer’s net written premium. The Insurer Fee applies broadly to most forms of health insurance. Many insurers have increased premiums to offset the fee. The American Action Forum  estimates that the fee will result in premium increases for the average insured individual of $60 to $160 per person in 2014 and $260 for the average family. The National Association of Insurance Commissioners requires health insurers to expense the 2014 fee, which will be paid in September, in the first-quarter statutory statements rather than accruing the fee quarterly. For more information, visithttp://www3.ambest.com/bestweek/purchase.asp?record_code=227625 .

WellPoint Sees Jump in Profits & Rate Increases

WellPoint announced a 24% profit increase in the second quarter of 2013 compared to last year. The company’s stock recently hit an all-time high of $90 per share. Mark Reback of Consumer Watchdog complains, “WellPoint and the other big health insurers are continuing to be two-faced when they preach austerity to their customers in order to raise premiums, then turn around and announce large profits and a record share price to shareholders. As federal health reform requires health insurers to disclose more information online, it will be harder for them to say one thing to customers and the opposite to Wall Street and investors. Most consumers remain vulnerable in many states where there are no regulations to reject excessive rate hikes, even when company profits exceed projections.” Anthem Blue Cross, WellPoint’s California subsidiary, recently imposed a rate hike on more than 250,000 small business customers. For more information, visit http://www.ConsumerWatchdog.org.

WellPoint Sees a Jump in 4th quarter profits

WellPoint reported stronger than expected fourth quarter results. John Cannon, interim president and CEO said “The results reflect ìimproved operating performance, solid expense management, and improving execution in our core operations. We are encouraged by this strong performance, and believe it positions us well for a solid 2013.”

Wayne DeVeydt, executive vice president and chief financial officer said, “Our fourth quarter results reflected lower than anticipated commercial medical costs and stability in our membership base. Our results were supported by the strength of our operating cash flow and year-end balance sheet metrics. We are encouraged by the performance of our associates and the business in the last six months, but we also want to retain an appropriately prudent stance in our outlook, in light of what we expect to be a fluid and dynamic market over the next 18 to 24 months. This is reflected in our initial expectation for 2013 EPS of at least $7.60.”

WellPoint reports the following results:

• Membership: Medical enrollment totaled 36.1 million members on December 31, 2012, an increase of 5.5% from December 31, 2011. The acquisition of Amerigroup added nearly 2.7 million state-sponsored members during the fourth quarter of 2012. Membership also grew by 74,000 in the senior business, primarily due to expansion into new Medicare Advantage service areas during 2012. The increases in state sponsored and senior membership were offset by a 578,000 decline in local group members and a 321,000 decline in national businesses and members. These declines reflected the company’s small group product repositioning in New York and changes to its administrative fee structure for certain national accounts. Enrollment was also impacted by economy-related in-group membership attrition and competitive situations in certain local group markets.
• Operating Revenue: Operating revenue totaled about $15.3 billion in the fourth quarter of 2012, an increase of $95.8 million, or 0.6%, compared to the prior year quarter. This increase included revenue of about $316.8 million related to the Amerigroup and 1-800 CONTACTS acquisitions.
• Benefit Expense Ratio: The benefit expense ratio was 87.3% in the fourth quarter of 2012 compared to 87.6% in the fourth quarter of 2011. The decline reflects increases in senior and state sponsored businesses in the commercial market.
• Medical Cost Trend: For the full year 2012, the underlying local group medical cost trends was near the low end of  7%. Unit cost increases continue to be the primary driver of medical trend while utilization moderated over the second half of 2012. The company expects the underlying local group medical cost trends to increase during 2013 and be within the range of 7% for the full year.
• Commercial Business: Operating gain in the Commercial segment increased 22% in the fourth quarter of 2011 — driven by an improvement in the benefit expense ratio for local group business. This was offset partially by the reduction in fully insured Local Group membership and increased SG&A expense.
• Consumer Business: The company has experienced an operating loss of $173.3 million in the consumer segment during the fourth quarter of 2012, compared to an operating loss of $4.6 million in the fourth quarter of 2011. The majority of the decline in consumer segment results was driven by closing costs with the Amerigroup acquisition as well as other severance and impairment expense items. The company also saw a decline in the results of its senior and state sponsored programs and has taken steps to improve the future performance of these businesses.

WellPoint expects the following for the full year of 2013:

• Net income is expected to be at least $7.60 per share, including integration costs related to the Amerigroup acquisition. Year-end medical enrollment is expected to be in the range of 35.3 million to 35.5 million.
• Operating revenue is expected to be from $71.5 billion to $73.0 billion.
• The benefit expense ratio is expected to be 86%.
• The SG&A expense ratio is expected to be 13.5%.
• Operating cash flow is expected to be at least $2.6 billion.

For more information, visit www.wellpoint.com.

Last Updated 08/10/2022

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