If you go to the WellPoint company page, WellPoint describes itself this way: "WellPoint's Blue-licensed subsidiaries and their affiliates provide a comprehensive range of group and individual health benefit, life and disability products."
WellPoint is all about profit (stock market symbol WLP) and in the health insurance industry that brings up some information that consumers MUST know in order to effectively publicize their own experience and worries.
WellPoint's next conference call for financial results is July 23, 2008. So what have they been trying to do? You can get a lot of honesty from an investor report, go to the April 23 report at http://ww.bcbs.com/news/plans/wellpoint-reports-firt-quarte.html.
Print it out and we'll go through it together, maybe you'll see something different from what I see.
Big profits, but you know how greed works, more profit wanted! The report starts with describing the first quarter as "challenging" because profits were $1.07 per share instead of the prior year's $1.26 per share.
More Members means more money so what was the "challenge" of the first quarter? Gotta look at where those members come from. Where those premium dollars come from: Membership. WellPoint describes "more [members] than ever before", 35.4 million members. (So far so good for WellPoint).
Further reading tells us that "the increase was driven by National business." Well, that cash cow that is Medicare is what this means to me. Individual enrollment actually declined. (So to me, the profit margin on those Medicare patients is not making the grade the same as ripping off younger, healthier citizens...let's read on.)
Operating revenue, okay now don't doze off. Operating revenue INCREASED, the money taken in. This makes sense, all those new Medicare patients and confirmed in the report by WellPoint "driven primarily by enrollment growth in the Senior business." Old people premiums, good for WellPoint.
Those national dollars (Medicare) really helped, but that wasn't enough because WellPoint also increased Local Group costs....you know, non-medicare health insurance premiums...no big surprise there, I don't think anyone is silly enough to think that all this consumer cooperation with health insurers is REALLY going to keep their rates from ballooning. If you can raise prices, why not? Of course, some may decide it's too costly and in fact WellPoint LOST a New York State prescription drug contract as explained in the same paragraph.
The next provision is KEY to insureds: The BENEFIT EXPENSE RATIO Without math understand that Insurance companies want this number as LOW as possible and Insureds want it at 100% because this percentage number is the answer to the question: How much of our premium dollars go to health services?
The easiest way to lower this number is to reduce what a company pays out in benefits.
This number can also be lowered by raising premium costs.
This number can also be lowered by delaying the payout of reimbursements for claims and getting a little extra interest on keeping those dollars.
For WellPoint, the benefit expense ratio INCREASED because the company says it "experienced higher claims experience in the Senior business"...uh duh, older people tend to use more medical services.
The next paragraph is key for all those Medicare Advantage shoppers who are electing coverage that will negatively impact all consumers because Medicare Advantage takes Medicare in the same direction as private insurance that non-elderly people have instead of shifting all health insurance plans to the wider coverage that Medicare was supposed to provide.
As the Medicare.gov website warns consumers: When you join a Medicare Advantage Plan, you use the health insurance card that you get from the plan for your health care. In most of these plans, generally there are extra benefits and lower copayments than in the Original Medicare Plan. "However, you may have to see doctors that belong to the plan or go to certain hospitals to get services." The site further warns: "In many cases, your costs for services can be lower than in the Original Medicare Plan, but it is important to check with the plan because the costs for services will vary." There you go, less access to providers for more money, the same old health insurance story.
Back to those capitalists at WellPoint: So what's a company to do? Their business grew because of Medicare but their profits were lower because of the increased benefit cost ratio, you know, people actually using their health insurance. Well, the company predicts that on July 23 and moving forward it will report lower expense ratio for the rest of 2008 because of "EXPECTED PREMIUM RATE INCREASES, ENHANCED MEDICAL MANAGEMENT INITIATIVES, "...you know, less coverage for more money.
Interestingly, the worsening conditions consider the 8% rise in costs overall of medical services, and instead of negotiating better rates, they'll charge more. And for those Medicare Advantage individuals who read that last week doctor pay was protected, do NOT think that your payments are protected, insurers will pay the cost of doctor fees protected by the Act but that cost will be passed on to consumers, bank on that.
Okay, what is the SG&A Expense ratio? It is the Selling General and Administrative Expenses. This is where you find out where company money is going and giving full credit to About.com (http://beginnersinvest.about.com/cs/investinglessons/l/blsga.htm)
such expenses include payroll and advertising costs. You know, conning the US consumer takes a village! Back to the report.
Sadly, WellPoint's SG&A was higher than it was the quarter before, from 14.4% to 14.6%. The company takes in money, it spends certain money on payroll and advertising. The higher this expense is, the lower the overall profit for the company. So WellPoint's payroll and advertising costs were higher. What is a company to do? Well, some might consider reducing pay increases or having layoffs, but not WellPoint...they are a health insurance company so what will they do? Go back to the paragraph before: "Company continues to price its business so that expected premium yield exceeds total cost trend INCLUDING...yup, the SG&A expense. So less coverage higher premiums will also help pay for salaries and advertising but those expenses will be a smaller percentage of total profits NOT by actually reducing costs of salaries and ads but by charging consumers more.
Hmmm...what else can a company do? Look at your day in claims payable paragraph. Increasing the DCP (Days in Claims Payable) from 45 days to 48.1 days can mean a lot of interest over 35.4 million people, no?
The next part of the report covers different parts of this company and of note is that the Company's Behavioral Health operations which saw enrollment increases.
So we reach the end of the investor report and await the next information to be gleaned from July 23rd report about profits...and how citizens are fleeced to finance companies such as WellPoint, the licensee for Blue Cross and Blue Shield companies nationwide (go to Website to figure out which ones).
You might have looked up WLP and seen that its value has dropped. It is not because the health insurer is acknowledging that maybe it should provide better service to consumers. As a separate note, WLP stock is down for another forward looking reason (of course in my opinion) and that is because of the Act that just passed the Senate (now goes to the President who will veto it and then back to override the veto) which maintains doctor pay by cutting health insurer reimbursements on these Medicare Advantage cash cows. While we wait for the changing of the guard, a new President, these companies continue to monopolize the health services field. Since doctors won't reduce the amount of pay they'll accept, since the cost of health services keeps rising, and since health insurers want to pay for less, this leaves more room for squeezing consumers.
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