Anthem (formerly WellPoint)
By Philip Mattera
WellPoint is a health insurance giant that emerged from the transformation of numerous non-profit state Blue Cross and Blue Shields plans into for-profit entities now linked under a single corporate umbrella. Until the passage of the Affordable Care Act, WellPoint was one of the insurers most often accused of rescinding the coverage of members who had run up large bills related to major health problems. The company paid out several hundred million dollars to resolve lawsuits and regulatory actions over rescissions and other abusive practices. In August 2014 WellPoint announced plans to change its corporate name to Anthem Inc. Two years later, Anthem proposed to acquire rival Cigna but the deal was stalled in the face of opposition from the Justice Department and various states.
“Squeezing Doctors and Hospitals”
WellPoint Inc. was created in 2004 through the $16 billion merger of Indianapolis-based Anthem Inc. and WellPoint Health Networks of Thousand Oaks, California. Anthem dated back to the 1944 founding of Blue Cross of Indiana by Mutual Hospital Insurance Inc. In 1985 Mutual Hospital and Mutual Medical Insurance, parent of Blue Shield of Indiana, merged to form a holding company called Associated Insurance.
In the 1990s, Associated acquired Blue plans in Kentucky and Ohio and put them, along with the Indiana plans, under the auspices of a new entity called Anthem Blue Cross and Blue Shield. Anthem went on to acquire Blues in Connecticut, New Hampshire, Colorado, Nevada, and Maine. In 2001 Anthem converted itself from a mutual insurance company into a publicly traded corporation owned by its shareholders.
Two years later, Anthem accelerated its consolidation drive by announcing plans to acquire WellPoint Health Networks, the parent of Blue Cross of California. WellPoint Health had already moved beyond California with its 1996 acquisition of the group life and health operations of Massachusetts Mutual and John Hancock Mutual as well as the subsequent purchase of Cerulean Companies, the parent of Blue Cross and Blue Shield of Georgia. A May 31, 2000 article in the Wall Street Journal stated that the company’s CEO Leonard Schaeffer “has made WellPoint one of the industry’s few financial successes by sticking to a simple strategy: squeezing doctors and hospitals.”
The merger of Anthem and WellPoint Health brought together two of the most acquisitive managed-care companies in the country. The combined WellPoint Inc. had more than 27 million members in 13 states. It grew even larger with the $6 billion purchase of WellChoice, operating as Empire Blue Cross Blue Shield in downstate New York and parts of New Jersey.
During the 2000s WellPoint was the subject of frequent accusations that it used pretexts to rescind the coverage of customers who had run up large medical bills. In testifying before Congress in 2009, a WellPoint executive was one of three industry officials who, despite intense criticism, said that their companies would not end rescissions. While Congress was deliberating over healthcare reform that year, WellPoint was one of the large insurers that went along with the idea but successfully opposed the inclusion of a public option among the choices that would be offered.
In 2010 WellPoint ended up in a public dispute with the Obama Administration after the President said during a radio address that federal officials had forced an unnamed insurance company to end its practice of systematically dropping the coverage of women diagnosed with breast cancer. WellPoint, which had faced accusations on the issue, claimed that the President’s statement “grossly misrepresents” the facts.
In 2012 WellPoint sought to strengthen its position in the privatized portion of Medicaid by announcing plans to spend nearly $5 billion to purchase Amerigroup.
Public Benefits
WellPoint was created through the conversion of non-profit Blue Cross and Blue Shield insurers into branches of a for-profit healthcare leviathan. Demands by state regulators that Anthem transfer hundreds of millions of dollars into a healthcare foundation brought an end to the company’s planned purchase of New Jersey Blue Cross in 1997, and Anthem later had to make contributions to non-profits to carry out subsequent acquisitions.
The issue of providing public benefits as part of a non-profit conversation was a major dispute when Blue Cross of California (BCC) turned its WellPoint Health Networks arm into a publicly traded company in 1993. BCC claimed that the community benefits rule did not apply, because only a portion of its operation was being converted. This did not sit well with the state legislature, which pressured BCC to agree to a $100 million lump sum payment to charity and a $5 million increase in its annual ongoing charitable contributions.
Yet that was not enough for the state insurance commissioner, who pressed BCC to transfer a large portion of the stock of WellPoint to a non-profit. BCC responded by devising a plan in which it would turn itself into a for-profit entity, merge into WellPoint Health and create two foundations that would receive 80 percent of WellPoint’s stock. When WellPoint Health merged with Anthem, the combined company was required to pledge another $265 million to boost healthcare in California.
Litigation
Starting in the late 1990s, WellPoint was one of the giant managed care companies hit with a wave of class action suits brought by physician groups and some of the same lawyers who had taken on the tobacco industry. For example, in May 2000 the California Medical Association filed a racketeering suit against WellPoint and two other insurers for interfering in doctor-patient relationships for financial reasons
The various lawsuits were all put under the purview of a single federal judge in Miami. In 2002 the judge granted class-action status to the claims brought by physicians regarding denied or delayed payments but declined to so the same for members of managed care plans. In 2005 WellPoint settled the physician class actions by agreeing to pay $198 million in cash and spend another $250 million on new information technology as well as procedural changes to resolve disputes with doctors and pay claims more promptly.
WellPoint also faced lawsuits over accusations that it rescinded coverage of customers after belatedly claiming to have found inconsistencies in their applications and then refused to pay for expensive medical services that had already been provided. In 2008 the company agreed to pay $11.8 million to settle a class action suit on the practice brought by California hospitals.
In 2008 WellPoint was one of the health insurers caught up in a scandal over their use of the Ingenix database (owned by UnitedHealth Group), which then-New York State Attorney General Andrew Cuomo alleged was systematically shortchanging plan members on reimbursements for out-of-network medical expenses. In 2009 several medical associations in California sued WellPoint over the issue. That suit is still pending, but WellPoint settled the case brought against it by Cuomo's office by agreeing to contribute $10 million toward the cost of creating an alternative database.
In 2012 WellPoint agreed to pay $90 million to settle a seven-year-old class action lawsuit that had accused the company of underpaying policyholders who had chosen to receive cash instead of stock when Anthem converted to a stock company in 2001.
In 2013 WellPoint Blue Cross agreed to pay $6 million to resolve allegations by the Los Angeles City Attorney concerning the improper rescission of policies.
State and Federal Regulatory Issues
In 2005 the Kentucky Department of Insurance fined Anthem Health Plans of Kentucky $2 million and ordered it to refund $23.7 million to more than 80,000 seniors and disabled persons who had been charged excessive premiums for supplemental Medicare coverage. Anthem appealed, and the parties later reached a settlement in which Anthem refunded $1.25 million.
In 2008 the California Department of Managed Health Care announced that Anthem Blue Cross and Blue Shield would pay a record fine of $10 million for its practice of rescinding coverage of some customers who ran up large medical bills. The company also agreed to offer new coverage to 1,770 former members it had cancelled since 2004. In 2009 Anthem Blue Cross settled similar charges brought by the California Department of Insurance by paying a fine of $1 million and offering new coverage to 2,330 other customers.
In 2010 California officials accused Anthem Blue Cross of committing more than 700 violations of state law, including consumer deception, failure to pay claims on time and taking a "belligerent" attitude toward inquiries from insurance regulators. The allegations came amid a controversy over the company's plan to impose large rate increases in the individual market. Anthem subsequently cancelled the increases after a consultant to the state questioned the projections Anthem had used to justify the rate hikes. The company then admitted that its request contained "inadvertent miscalculations."
In 2013 the California Department of Managed Health Care announced that Anthem Blue Cross would pay more than $3 million to medical providers to resolve a dispute over interest payments on claims that the company failed to pay on time in the period from 2007 to 2011.
In 2013 WellPoint agreed to pay $1.7 million to the U.S. Department of Health and Human Services to resolve allegations that the company failed to properly safeguard sensitive personal information submitted by customers in online application forms.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Employee Benefit Research Institute
Physicians for a National Health Program
Key Books and Reports
Deadly Spin by Wendell Potter (Bloomsbury Press, 2010).
One Nation Uninsured by Jill Quadagno (Oxford University Press, 2005).
Private Health Insurance: Research on Competition in the Insurance Industry (U.S. Government Accountability Office, July 31, 2009).
Sick: The Untold Story of America's Health Care Crisis by Jonathan Cohn (HarperCollins, 2007).
The Corporate Transformation of Health Care: Can the Public Interest Still Be Served? by John Geyman (Springer, 2004).
Underpayments to Consumers by the Health Insurance Industry (Office of Oversight & Investigations of U.S. Senate Commerce Committee, June 24, 2009).
Last updated September 14, 2016