6. Well Point

6. Well Point

CEO: Angela F Braly
2007 compensation $9.1 million
HQ: Indianapolis, IN
Profits: $3.2 billion (2007)
Assets: $51.6 billion

WellPoint has a long history of putting its bottom line ahead of the welfare of its policyholders and their health care provides. Investigations have shown that Well Point routinely cancels the policies of pregnant women and chronically ill patients.
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Indianapolis-based Anthem and Thousand Oaks, and California-based Well Point completed a $20.8 billion merger in late 2004, creating the nation’s largest health insurer, covering approximately 28 million people. The deal was widely criticized by consumers, doctors, pension managers, and state regulators, who feared the merger would create a monopoly that would both raise premiums and reduce payment on claims, in part to cover the cost of the massive severance package offered to executives who brokered the deal.

California’s State Treasurer Philip Angelides and Insurance Commissioner John Garamendi, as well as officials at the California Public Employee’s Retirement System, or CalPERS, criticized the deal for providing excessive compensation to executives. The terms of the merger included a payout of over $250 million to nearly a dozen executives at the company. Leonard Schaffer, Well Point’s Chairman and CEO at the time, received the largest windfall of all: nearly $82 million in severance, an executive pension, and stock options.

California is making an aggressive effort to force Well Point to stop engaging in practices it believes are illegal. In March 2007, the state’s Department of Managed Health Care fined Blue Cross of California and its parent company, Well Point, $1 million after an investigation revealed that the insurer routinely canceled individual health policies of pregnant women and chronically ill patients. The practice, known as rescission, is illegal in California. In order to drop individual policies, which are usually purchased by consumers who cannot receive health insurance through their employer, the insurer must show that the policyholder lied about their medical history or preexisting conditions on application. As part of the state’s investigation, regulators randomly selected 90 cases where the insurer had dropped the policyholder. In every single one investigators found the insurer had violated state law.

During the investigation, California regulators uncovered more than 1,200 violations of the law by the company in regard to unfair rescission and claims processing practices. In December 2007, Insurance Commissioner Steve Poizner announced his office was imposing a $12.6 million fine against Blue Shield, saying the company had “committed serious violations that completely undermine the public trust in our healthcare delivery system.” Among these violations were improper rescissions, failure to pay claims on a timely basis, failure to provide required information when denying a claim, failure to pay interest on claims where required, and mishandling of member appeals.

Despite a series of fines and reprimands from the state, Anthem did not change its claims-handling practices. The continuation of rescission practices forced Los Angles City Attorney Rocky Delgadillo to sue Anthem Blue Cross of California in April 2008, for fraud, violation of state and federal insurance regulations, and violation of truth-in-advertising laws. Anthem’s practice of canceling policies of sick patients prompted Delagdillo to claims that “[t] he company has engaged in an egregious scheme to not only delay or deny the payment of thousands of legitimate medical claims but also to jeopardize the health of more than 6,000 customers by retroactively canceling their health insurance when they needed it most.” He also alleged that “more than 500,000 consumers have been tricked into purchasing largely illusory healthcare coverage based upon the company’s false promise.” The city is seeking civil penalties of between $2,500 and 5,000 for each violation, which could add up to over $1 billion.

Other states have taken action against Well Point and its subsidiaries over their claims-processing practices. In January 2008, Nevada Insurance Commissioner Alice A. Molasky-Arman announced a $1 million settlement with Anthem Blue Cross and Blue Shield over systematic overcharging of policyholders. Similarly, Colorado’s Insurance Commissioner, Marcy Morrison, secured a $5.7 million refund for consumers of Anthem Blue Cross Blue Shield health insurance policies. In Kentucky, the Office of Insurance ordered Anthem Health Plans of Kentucky to refund $23.7 million to 81,000 seniors and disabled people over inaccurate Medicare claims payments.

Physicians have their own set of grievances against the insurance behemoth. Well Point was one of the several health insurers sued by 800,000 doctors who claimed they were routinely denied full payment for care they provided to policyholders. In two lawsuits, the physicians argued that insurance companies manipulated computer programs to systematically underpay physicians for the treatments they provided

Physicians in California have encountered a new reason to be outraged by Well Point. Blue Cross California has recently sent letters to physicians instructing them to inform the company of any pre-existing conditions they come across when evaluating patients. The letter demanded that “[a] ny condition not listed on the application that is discovered to be pre-existing should be reported to Blue Cross immediately.” The California Medical Association promptly forwarded the letter to state regulators complaining that the insurance company is “asking doctors to violate the sacred trust of patients to rat them out for medical information that patients would expect their doctors to handle with the utmost secrecy and confidentiality.”