Wellpoint’s wasted opportunity
Sometimes with something so egregious gets written that, even if it’s in the Wall Street Journal, you have to notice it. Angela Braly, the CEO of Wellpoint—compensation a hair under $10m in 2009—ought to be happy, even though Joseph Rago in the WSJ is surprised about that. It looks like the health reform bill which put much of Wellpoint’s highly profitable individual and small group business at risk is dead, and this week Wellpoint started putting up rates between 35% and 80% in the California market (where it’s Anthem Blue Cross).
But the WSJ quotes her as calling health reform a “wasted opportunity”. Funnily enough Wellpoint and the trade association it funds, AHIP, were on both sides of the debate. Pushing Congress to give it 30 million more customers as part of the bill, and then surreptitiously funding the Chamber of Commerce to oppose health reform (and putting pressure on the Blue Dogs, and the DINOs in the Senate) when some of the terms of the House Billstarted to look less favorable (85% Med loss ratios limits among them).
I’d had some semi-decent hopes for Braly and her team.
In 2007 Braly hadreplaced the reprehensible Larry Glasscock as CEO and seemed to have a longer term view to establish real system value. The high point of this was the 2007 announcement that Wellpoint would pay staff bonuses on the health status of its members, but it’s also funding the Health Care X Prize. Then Wellpoint’s stock value collapsed at the start of 2008 when it became apparent that they were going to be losing members in the recessionand Medicare Advantage dollars from the Democratic Congress. I had vague concept that this might mean a real change in the way the company would behave. But realistically that was never going to happen.
Instead,as usual short-termism is in. Health reform that creates a stable long-term private insurance market is opposed—whether proposed by a California Republican or a moderate Democratic President.And with Wellpoint’s stock price up double from its late 2008 low, I suspect Braly is looking forward to cashing in rather more stock options when the profits from this year’s premium increases add to the stock price.
But that’s all understandable. It’s just business and who cares if, after this collapse of health reform, next time around it’s very likely to be a single payer system that does away with health insurers altogether. Braly will be long gone by then—even if some of her colleagues in the non-profit world would like their organizations to stay around.
But what is really weak is the feeble attempt Wellpoint has made, using what the WSJ calls its tools as “an industry leader in data analytics” to actually do anything to improve its members’ health status. Later this week I’m going to give you a visceral example of that using a member I know very well (yes, me). But for now I remind you of these words from anarticle I wrote about Braly’s two-ago predecessor, which was called Too much Fawning about Len Schaeffer
So there you have it. Being really smart about pricing and risk is how you run a successful insurance company…..But this just goes to show that what Schaeffer is good at — running a lean mean ultra-competitive pricing business — has little if anything to do with solving the wider problems of the health care system that he’s so eloquent about
It appears that a decade on little has changed.