Public Interest Versus Private Greed

by poputonian

A few posts ago, Hullabaloo regular llamajockey and I had a little sidebar about healthcare in Indiana. I was very pleased to hear that Michael Moore’s latest work Sicko will be looking closely at two Indiana corporations: Eli Lilly and Anthem/Wellpoint. With regard to the history of Anthem/Wellpoint, the link below to the Consumers Union details how, in Indiana, two nonprofit corporations from the 1940s became the publicly-traded, for-profit Anthem, Inc., which itself would later become Wellpoint:

Conversion and Preservation of Charitable Assets of Blue Cross and Blue Shield Plans: How States Have Protected or Failed to Protect the Public Interest

Indiana Blue Cross and Indiana Blue Shield were created in the 1940s. In 1985, the two plans merged and changed their name to Associated Insurance Companies, Inc. In 1989, Associated created a wholly-owned subsidiary, Accordia, Inc., to handle insurance brokerage, claims administration, underwriting management and employee benefit consulting services. Associated conducted an initial public offering of Accordia stock in 1992 and in 1996, the name was changed to Anthem Insurance Companies. Anthem, a mutual insurance company, has purchased BCBS plans in Colorado, Connecticut, Kentucky, Maine, Nevada, New Hampshire and Ohio.

In February 2001, Anthem announced its intention to convert from a mutual insurance company to a stock corporation (“demutualization”), and filed its demutualization plan with the Indiana Department of Insurance in June 2001. The plan deprived policyholders in Colorado, Maine, Nevada and New Hampshire of any right to receive shares in the new company whereas policyholders in Connecticut, Indiana, Kentucky, and Ohio were eligible. Consumer groups in all Anthem states (the eight already owned by Anthem along with soon to be acquired Kansas) concerned about the potential impact of this conversion on health care coverage, encouraged regulators in the Anthem states to review the transaction carefully and to impose conditions that would protect current and future policyholders. Despite this request of the multi-state coalition, only the Indiana Department of Insurance conducted a public hearing – as required by state law. The hearing was held in Indianapolis (Anthem’s home base) in October 2001 and was quickly followed by the approval of the Indiana Insurance Commissioner. Subsequently, Anthem launched its IPO to become a publicly traded for-profit company.

So next came the obligatory attaboy (tongue-in-cheek) for Anthem CEO, Larry Glasscock and his helpers (yes, it really says merit pay):

Anthem Chief To Get Merit Pay Of $42.5 million

The top executive at Anthem Inc. will receive a $42.5 million stock-and-cash award for guiding the company as it became the state’s largest firm and now stands to become the nation’s largest health benefits company.

Larry C. Glasscock will receive the merit-based performance award over the next three years on top of his salary, bonus and other compensation of $3.73 million last year. It’s the most compensation Glasscock has received since he became the company’s chief executive in 1999 and helped convert it to a publicly traded concern in 2001.
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The large cash-and-stock awards for Anthem executives — based largely on the firm’s profits from 2001 to 2003 — are some of the biggest ever seen in corporate Indiana. The company reported net income of $743 million in 2003, up 41 percent from the previous year.

Award amounts of $16 million each went to Glasscock’s two highest-ranking associates: executive vice presidents David R. Frick, an attorney and former Indianapolis deputy mayor, and Michael L. Smith, a former chief executive of moving company Mayflower Group.

In addition, the president of Anthem Midwest, Keith R. Faller, will get a stock-and-cash award of $11.9 million, while Anthem Southeast President Thomas G. Snead Jr. got $4.36 million.
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If Anthem acquires WellPoint Health Networks of California this summer, as expected, Anthem will have grown during the past decade from a one-state, nonprofit Blue Cross-Blue Shield licensee to a public company that handles the health benefits of one of every 10 insured Americans.

Then, in 2003, Anthem indeed swallowed Wellpoint. Oligopoly Watch reported on those details:

Big Healthcare Merger

Indiana-based Anthem, one of the largest managed care companies in the US announced it will acquire California-based WellPoint Health Networks for about $16.4 billion (a cash and stock deal). The new company will operate under the WellPoint name but will have its headquarters in Indianapolis. In fact, Anthem is the smaller company. Anthem has a market capitalization of around $11 billion, while WellPoints’s is around $12 billion.

According to the Wall Street Journal (“Anthem to Acquire WellPoint Health”, 10/27/2003).

The transaction brings together two of the nation’s largest providers of Blue Cross and Blue Shield plans, with about 26 million members. More importantly, it will transform the Blue Cross and Blue Shield name into a truly national brand for the first time. The Blue plans currently operate under license from a nonprofit association but are owned by different companies.
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Both WellPoint and Anthem have a long history of acquisitions as they have grown from single-state Blue Cross/Blue Shield providers to major national managed care chains. While Blue Cross was once existed only as independent state programs, in recent years, there has been a frenzy of acquisitions as one after another has been snapped up by the larger managed care oligopolies.

WellPoint started in 1942 as the managed care of Blue Cross/Blue Shield of California.

*In 1996, WellPoint acquired the health insurance division of Massachusetts Mutual Life Insurance Company.
*In 1997, that was followed by the group health division of John Hancock Mutual Life Insurance.
*In 2000, it bought up PrecisionRx, a mail-order pharmacy, along with Rush Prudential Health Plans of Illinois
*In 2001, Cerulean Companies, Inc.-parent company of Blue Cross and Blue Shield of Georgia.
*In 2002, WellPoint acquired RightChoice, the parent company of Blue Cross & Blue Shield of Missouri and of the Healthlink network. The company also acquired the MethodistCare HMO in Texas.
*WellPoint in August 2002 just completed acquiring Cobalt Corp. Cobalt was founded by the merger of Blue Cross & Blue Shield United of Wisconsin and United Wisconsin Services, Inc
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The Anthem name was invented in 1997. In 2002, Anthem acquired Trigon Healthcare of Virginia for $4 billion. On the other hand, this August, it got a rebuff when its attempt to acquire Blue Cross & Blue Shield of Kansas was ejected by the Kansas Supreme Court, citing competition reasons.

According to the WSJ, “The deal will be one of the year’s largest mergers, and is likely to trigger other unions among providers of managed care.
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Most analysts expect that things will not be so great for “members” or medical providers like doctors and hspitals. Anthem in particular has had a growing number of complaints about its prompt payment for treatments. As an oligonomy, these new healthcare giants can squeeze on both sides to make money, and they tend to squeeze hard. With headquarters remote from the people they serve and less competition all the time, the incentive for good service is slackening.

So how have the Anthem/Wellpoint executives fared post-merger?

Health Insurance CEOs Feast On Exec Pay

Executives at WellPoint have enjoyed a cornucopia of compensation in recent years.

The wealth came as the new WellPoint, headquartered on Monument Circle, was created from the $20.8 billion merger of Anthem of Indiana and WellPoint Health Networks of California.

Since then, 31 current and former WellPoint insiders have sold more than $500 million worth of company stock, according to insider trading data tracked by Thomson Financial. Those sales, along with exercising stock options, have given those insiders gains well in excess of $150 million.
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WellPoint, which provides health insurance to more than 34 million people nationwide, says its executive compensation policies are designed to recruit and retain top talent in a competitive marketplace.Company spokesman Jim Kappel said those executives help WellPoint in “delivering more benefit to its members than ever before while helping to hold down the rising costs of health care.”

Delivering more benefits and holding down costs? For the residents of Indiana? Since the original BCBS public-interest, nonprofit charters were converted for private gain by self-interested sharks? Yes, says the Anthem-Wellpoint web-site (see the “About Us” tab):

Our mission is to improve the health of the people we serve. At Anthem, we believe the best health care coverage can actually help people stay healthy. That’s why we go beyond simply providing health care coverage. We help encourage members’ wellness by:

-Offering large networks of some of the region’s best physicians, specialists and hospitals.
-Reminding members to have important preventive screenings.
-Providing programs and information to help manage chronic health conditions.
-Offering related services including dental coverage, life insurance and pharmacy benefits management.

We work with physicians, hospitals and other providers to help ensure that care is accessible, coordinated, timely and provided in a manner and setting that promotes positive patient-provider relationships.

But no, says today’s Indianapolis Star:

More than a half-million Hoosiers have no health insurance, an uninsured rate among the highest in the nation. To make matters worse, compared with other states, we’re not very healthy. Too many of us smoke, are overweight and lack childhood immunizations, with rates far above the national average. These lead to higher medical bills, for which you, the taxpayer, help pay.
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Indiana’s alarming health statistics
• 561,000: Hoosiers without health insurance on any given day.

• $953: additional amount each family with health insurance paid in premiums in 2005 to cover the uninsured.

• 10,200: children under 18 who start smoking each year.

• 160,000: children now under 18 who will die prematurely from smoking.

• Second: number of adult smokers compared with other states.

• 10th: percentage of adults who are overweight/obese.

• 22%: children do not receive requisite immunizations by their second birthday and lack immunization against preventable diseases.

You gotta love that invisible hand, working in mysterious ways to create private wealth out of the public good. And who sits on the Wellpoint Board and has apparently enjoyed seven-figure gains from some of these private transactions? Susan Bayh, wife of Indiana Senator and former presidential hopeful, Evan Bayh.Sicko indeed.UPDATE: Commenter tofubo notes the President’s uncle Bucky Bush is also on the Wellpoint Board.