39% Premium Increase in California for Anthem
February 9th, 2010
Anthem Blue Cross in California has announced premium increases of up to 39% for its members and have defended that increase in a letter to Health and Human Services Secretary Kathleen Sebelius. As pointed out in that letter, the “39% figure” is the worse case scenario for some members.
Anthem blames the need for the increase on declining membership and skyrocketing medical costs.
So, just for curiosity, I took a look at WellPoint, Inc.’s end of 2009 financial report. WellPoint owns Anthem in California. In fact, they probably own a significant share of any health insurance in your state. “WellPoint is the nation’s largest health benefits company, with approximately 34 million members in its affiliated health plans.”
Let’s discuss SG&A expenses. Every business has them. Selling, General & Administrative Expenses account for 17% of every WellPoint premium dollar. And that percentage increases every year, “an increase of 190 basis points from 15.1 percent in the fourth quarter of 2008.” Soaring medical costs? “For the full year of 2009, underlying medical cost trend was 8.9 percent.” Flight from the plan by all the healthy people? “Medical enrollment was approximately 33.7 million members at December 31, 2009, a decrease of 1.4 million members, or 3.9 percent.”
So, I envision that while costs went up, membership went down, and medical costs were not contained, the driving forces of capitalism would tie executive pay to performance. But there really is no evidence of that having occurred. Profits increased and WellPoint had over $3.0 billion in operating cash flow for 2009. “For the full year of 2009, net income totaled $4.7 billion, or $9.88 per share.”
WellPoint, under the direction of Larry Glasscock (a graduate of my alma mater Cleveland State, Go Vikings!), went public and the stock price soared to nearly $90 even after a stock split in 2005. It hovers around $60 today. The reality is that when health care is a profit making business, it will be run with the benefit of stockholders first and foremost–as it must.
It is not likely to change in the absence of meaningful health care and insurance reform. And, one has cause to believe your representatives will never achieve such meaningful reform, WellPoint has it’s own political action committee called WellPac and, if your interested, a list of the politicians it contributed to in 2008 is here.
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Tags: Anthem, Premium Increase
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