WELLPOINT: Investors See HMO As Class Apart
Investor's Business Daily reports that Wellpoint Health Networks Inc. is being singled out by investors as a beacon in "an industry beset by political attacks and financial nightmares." Wellpoint, set to purchase Georgia Blue Cross/Blue Shield operator Cerulean Cos. of Atlanta this month, is "the only company in the (managed care) industry that earns its cost of capital," said CS First Boston analyst Joseph France. He added that Wellpoint is also "certainly more focused than anybody else in the industry on consumer choice." Analyst Peter Costa of ABN AMRO said that, in pioneering the formation of PPO and POS, Wellpoint CEO Leonard Schaeffer "believed the answer was not to push everyone into an HMO but to offer a broad product line. And he was right." IBD reports that "health insurers expose themselves to more risk when they offer less restrictive plans to consumers. When they go too far out on a limb to please the customer at a low price, they can end up taking a nasty fall." WellPoint, however, "has thrived ... by knowing how to gauge risk and stay out of trouble." The paper traces Wellpoint's history of success in indemnity insurance through its ties to Blue Cross of California, and notes its relative avoidance of Medicare HMO contracts (Gray, 12/8).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.