How to exceed expectations and please Wall Street, health-insurance parasite style
Last week Wellpoint (the parent company of my own adopted parasite, Empire Blue Cross Blue Shield) posted a first quarter net income which had gone down from the previous quarter, but not so much of a decline as Wall Street had expected.
WellPoint Inc.'s (WLP) first-quarter net income fell 1.3% Wednesday on sharply higher investment losses and amid continued enrollment declines, but the health insurer's strong operating performance offers further encouragement for the pressured industry.
I'm so relieved!
Excluding the investment losses, the largest managed-care company by membership reported operating earnings that easily surpassed analyst expectations, thanks in part to a better handle on medical costs.
A better handle on medical costs - are you thinking what I'm thinking?
Notably, WellPoint's medical cost ratio - the percentage of premium revenue used to pay patient bills, a key indicator of profitability - fell 3.5 percentage points to 81.6% amid disciplined pricing and operating improvements in senior and local group businesses and more favorable prior-period claims development.
OK, just stop and ponder that for a moment. Their profitability increased because a smaller percentage of the money they took in from premiums was spent on actual health care.
They could, of course, have decreased the percentage that they spent on administrative overhead. (Yes, I know, I'm a dreamer!)
Or, assuming arguendo that they decreased the percentage spent on patient bills by decreasing those pesky unnecessary procedures we keep hearing about* - couldn't that savings, in my dream world, have translated into lower premiums? No? Oh, well...
WellPoint's report comes a day after UnitedHealth, the largest managed-care player by revenue, also posted first-quarter earnings that significantly exceeded Street expectations.
Well, good then!
I submit to you - More proof, if any is needed, that we need to get the publicly traded insurance companies, with their eyes on Wall Street and their stock performance, out of the health care delivery business.
* edited to add: I have tried, and failed, to understand or find out what "disciplined pricing and operating improvements in senior and local group businesses and more favorable prior-period claims development" means. I'm especially curious about that "more favorable prior-period claims development" part. Sounds suspiciously like not paying old claims, to me. But you know how I am...