WellPoint Press Conference April 7, 2010

The press conference outside WellPoint headquarters in downtown Indianapolis was a tremendous success.  See the HCHP website for media coverage, including TV.  Here is the text of Dr Stone’s statement:

People ask me, why should WellPoint shareholders vote for the proposal that the company explore returning to its traditional Blue Cross, charitable, not-for-profit mission?

The reasons keep coming out in the newspapers, and let me mention a few from the last 12 weeks.

The Indianapolis Star on January 16 exposed that WellPoint has been covertly funding U.S. Chamber of Commerce attack ads against health care reform.  WellPoint spent tens of millions on other non-covert lobbying.  Keep in mind that the bill recently passed was largely written by former WellPoint Vice President Liz Fowler in her role as Max Baucus’ chief healthcare legislative aide.

McClatchy Newspapers on February 24:  ”While Anthem Blue Cross proposed a 39 percent rate increase on thousands of its California customers, its parent company gave 39 of its executives more than $1 million each and spent more than $27 million on 103 lavish executive retreats, congressional investigators said.”

The Los Angeles Times on March 10 updated its readers on the ongoing rescission scandal involving WellPoint in California. “Only a small fraction of eligible Californians have benefited from agreements that Anthem Blue Cross made to settle accusations that they systematically and illegally dropped sick policyholders to avoid paying for their care.”  These were people whose insurance coverage was cancelled after they were diagnosed with cancer and other serious conditions.

The Los Angeles Times again, on March 18 reported that in 2007 WellPoint had pledged through its charitable foundation to spend $30 million over three years to help those lacking health coverage, but its tax records and website show it gave only $6.2 million.

Consumer Watchdog reported March 31 that WellPoint sent a message to investors describing how it would simply re-label administrative costs as “medical care” in response to the new health reform law. The message follows revelations that WellPoint, also intentionally padded already huge premium increases in California, just in case regulators demanded reductions.

Also on March 31, Revive Public Relations released the results of its fourth annual national payer survey of hospital executives. Survey results showed a marked decline in WellPoint/Anthem’s reputation, now 2nd worst of all health insurance companies in their study.

And now this week the news of CEO Angela Braly’s 51% salary increase, up to $13.1 million.  The arrogance is overwhelming.  Why wouldn’t shareholders be concerned with the direction this company is heading?

Yesterday afternoon in Bloomington I listened to Allan Hubbard speak on health care reform at Indiana University.  Mr Hubbard, an Indianapolis businessman, served in the GW Bush administration and is a recent member of WellPoint’s Board of Directors.

He made no bones about being a Republican and shared a Republican view on where health care reform should go from here.  At the end of his talk he concluded with this prediction: “My guess is that in 15 years we will have a single payer health plan, Medicare for All.”  He wasn’t saying that gleefully.

He explained that all the health insurance companies do is serve as middlemen between patients and providers, (doctors and hospitals).  He fears that as health care reform moves forward, Congress and the people will turn on them as a way to cut spending.

They (we) should.  The health insurance industry adds huge administrative costs to our system, not to mention the profits they siphon off.  WellPoint is a parasitic middleman that adds no value, but actually increases the cost of healthcare for all of us.

I see the day when socially responsible investors will divest themselves from health insurers’ stocks.

My recommendation is that WellPoint investors look at drastically changing the direction of our company, and not wait for the stock price to plummet once the public figures out that insurance companies should go.


WellPoint Shareholder Proposal – Feasibility of Non-profit Conversion

Below is the text of our resolution that will be included in the WellPoint proxy statement released the first week in April, 2010, with the annual meeting to be held the morning of Tuesday May 18, in Indianapolis.



We have been informed that Robert Stone and Karen Green Stone (husband and wife), Bloomington, Indiana, and Julia Vaughn, Indianapolis, Indiana, collectively the beneficial owners of 53 shares of our commons stock, intend to introduce at the annual meeting the following resolution.  The following shareholder proposal will be voted on at the annual meeting only if properly presented by or on behalf of Mr. Stone, Mrs. Stone and Ms. Vaughn.  In accordance with SEC rules, the text of the proposed shareholder resolution and supporting statement is printed verbatim from its submission.

“Whereas, the United States allows too many people to suffer and die due to lack of adequate health insurance and this is threatening the economic stability of the country; and

Whereas, no country has achieved universal healthcare through for-profit health insurance; and

Whereas, in written statements WellPoint supports “the best healthcare value for our customers” and promises  “to advocate for responsible healthcare reform”; and

Whereas, WellPoint has actively opposed President Obama’s healthcare reform efforts; and

Whereas, WellPoint was a nonprofit insurance company before it demutualized, raised capital through stock offerings, merged with, acquired, and demutualized other nonprofit Blue Cross/Blue Shield companies; therefore be it

Resolved, that the shareholders of WellPoint urge the board of directors to launch a feasibility study for returning to nonprofit status.  This study, conducted at reasonable cost, with results made available to the stockholders, omitting any proprietary information, should be completed within nine months of the 2010 shareholder meeting.

The proponent has furnished the following statement:

Investors are concerned about the effects of runaway health costs on the economy, and the crisis of over 46 million uninsured.  Recent studies show 45,000 people a year die because they lack health insurance (American Journal of Public Health 9/17/09).   Tens of millions more are underinsured, able to afford coverage only through policies with huge deductibles and out of pocket expenses.  The impact of high deductible policies is seen in recent bankruptcy data showing 62% of personal bankruptcies caused by illness and medical bills, but 78% of those declaring bankruptcy for medical reasons had insurance when they became ill (American Journal of Medicine 8/09).  WellPoint has been a leader in marketing high deductible policies, specifically under the Tonik label.

From 1999 to 2008 American health insurance premiums increased 119% while workers earnings and overall inflation rose 30% (Bureau of Labor Statistics).  Businesses cannot continue to afford covering their employees. The Hewitt Associates study “The Road Ahead: 2009” found 1 in 5 employers are planning to drop health benefits in the next 3 to 5 years.  This system is unsustainable.

Studies show 31% of US healthcare spending is attributed to overhead.  In comparison, Medicare runs 3.1% overhead.  Most other developed nations spend less than 10% on overhead (New England Journal of Medicine 8/21/03).  Nations with universal systems spend about half what we spend on a per capita basis and have better health outcomes (Organization for Economic Cooperation and Development).

WellPoint’s reputation has suffered as a consequence of the negative publicity surrounding its efforts to oppose healthcare reform.  This resolution could change that.

The Board recommends a vote AGAINST this proposal for the following reasons:

This proposal requests that our Board of Directors conduct a feasibility study for “returning” the Company to nonprofit status.  As an initial matter, the proposal states that we were formerly a nonprofit entity.  That is not correct. Anthem Insurance Companies, Inc., one of our wholly-owned stock subsidiaries, was until its demutualization in 2001, a “for profit” mutual insurance company organized under Indiana law (although some of the Blue Cross and Blue Shield companies we have acquired since 1993 had been nonprofit entities at some time in their respective corporate histories). Nevertheless, we assume that the fundamental intent of this shareholder proposal is to call for a feasibility study for our conversion to a nonprofit organization.  We are responding to the proposal on that basis.

Converting to a nonprofit organization would result in, among other things, the elimination of the ownership interests of our shareholders.  The Board does not believe that the vast majority of our shareholders desire that result.  Moreover, the Board believes that the process of converting to nonprofit status would be costly and complex.  While it is not clear what transaction structure could be used to accomplish a conversion to nonprofit status, the Board believes that any conversion transaction would require at a minimum that our shareholders receive the fair value of their shares (except for shares held by any shareholders willing to contribute them without consideration as a charitable contribution), which would require, in the aggregate, the payment of significant sums of cash.

The Board believes that our conversion to a nonprofit organization would not be in our best interests or the best interests of our shareholders, employees, customers and members, as well as the communities we serve.  The Board believes that having access to the public capital markets is the best way to strengthen our capital and competitive position, to serve an increasing number of customers and members, and to continue investing in infrastructure, new products and programs that improve the quality of service to customers and members.  As a nonprofit organization, we would not be able to raise capital by selling stock and could not issue stock to pay for business acquisitions.  Without access to the equity markets, the Board also believes that our ability to borrow money to support our operations and fund business investments and business acquisitions would be more restricted and more costly as compared to our borrowings as a for profit stock corporation.  In addition, we would be restricted in our use of stock as part of the compensation plans and programs for our employees, which would likely impair our ability to attract and retain well-qualified individuals to our management team and to set compensation and benefits programs that are consistent with market practice.  Overall, the Board believes that our future growth, new product development and our ability to serve our constituencies would be impaired by the reduced capital that would be available to us as a nonprofit organization.

The proponent of this proposal has not presented any factual information to support the view that converting to nonprofit status would benefit us or our shareholders, employees, customers and members.  On the contrary, for the reasons described above, the Board believes that converting to nonprofit status would not be in our best interests or in the best interests of our shareholders, employees, customers and members.  A feasibility study for converting to nonprofit status would be costly and would distract management and the Board from overseeing our operations and, given the other considerations described above, is unwarranted.

For the reasons described above, the Board opposes the feasibility study requested in the proposal and recommends a vote AGAINST this proposal.  Proxies will be voted AGAINST the proposal unless you specify otherwise.