Insurer WellPoint To Raise Health Premiums
The Wall Street Journal on Wednesday examined how WellPoint CEO Angela Braly "is attempting a delicate balancing act: raising premiums enough to placate investors but not so much as to send customers fleeing elsewhere." According to the Journal, the "conundrum of how to reassure investors that profit will be maintained without losing business is confronting the entire health insurance industry," but "the challenge is acute at WellPoint, which covers or administers health benefits for 35 million people across 14 states."
Braly, who became WellPoint CEO last June, has "tried to reverse a margin decline that has pushed its stock down nearly 40% this year," but "her actions, thus far, have irritated some customers more than they pleased investors," the Journal reports. Earnings for WellPoint have decreased by 17.3% this year. In response, WellPoint in March began to increase premiums, a move that contributed to the loss of 189,000 members in the first six months of 2008 and the expected loss of an additional 150,000 members by December. WellPoint officials have said that the company has sought to retain more profitable business and that the members who have left tend to cost more.
However, "some analysts believe that continued customer losses risk putting WellPoint in an unflattering light," and, during "an election season that features new calls to overhaul health care, the company's efforts to fix its earnings drop by raising premiums could make it a target," according to the Journal (Fuhrmans, Wall Street Journal, 9/3).
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