US health insurer WellPoint buys Amerigroup

US health insurer WellPoint is buying Amerigroup, a manager of publicly funded health programs, for about $4.9 billion, the companies said Monday.

The acquisition will position the companies for future growth as they prepare for the launch of insurance exchanges, they said.

The deal comes on the heels of the US Supreme Court's decision in late June to uphold President Barack Obama's health care reform, the Affordable Care Act.

Under the overhaul, states are to have health insurance exchanges, where consumers can shop for coverage, starting in 2014.

WellPoint will pay $92 a share in the all-cash deal for Amerigroup, which specializes in federal and state health care programs such as Medicaid, serving the poor and disadvantaged.

The share price represents a 43 percent premium over Amerigroup's closing price Friday. WellPoint will pay about $4.4 billion for the shares and assume Amerigroup's debt.

"We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees," WellPoint's chief executive Angela Braly said in a statement.

The companies said the combination was aimed at "creating better health care quality at more affordable prices for their customers."

The transaction was expected to close in early 2013.

"Upon completion, WellPoint, with its affiliated Medicaid plans, will serve more than four-and-a-half million beneficiaries of state sponsored health care programs. The combined company's Medicaid footprint will include 19 states," the companies said.

WellPoint, based in Indianapolis, Indiana, has about 96 million people in its health plans.

Amerigroup currently serves about 2.7 million members in 13 states.

Investors applauded the deal in early New York trade. Amerigroup shares soared 37.9 percent to $88.72, while WellPoint climbed nearly 3.0 percent to $61.69.

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Health insurer WellPoint purchasing Amerigroup for approximately $4.46 billion

INDIANAPOLIS - Health insurer WellPoint Inc. is buying managed care provider Amerigroup Corp. for about $4.46 billion in cash, saying the deal will help it better serve recipients of a gvernmentl healthcare program for the needy and disabled.

Amerigroup manages publicly-funded health programs like Medicaid. It operates in 13 U.S. states, including Texas, Florida, New York and New Jersey.

The combined company will serve Medicaid recipients in 19 states.

Indianapolis-based WellPoint said Monday that it will pay $92 for each Amerigroup share. That's a 43 per cent premium to the company's closing price Friday of $64.34.

Amerigroup currently has about 48.5 million outstanding shares, according to FactSet.

Shares of Amerigroup soared $25.86, or 40.2 per cent, to $90.20 in premarket trading, while WellPoint's stock gained $1.29, or 2.2 per cent, to $61.20.

The companies put the total value of the deal at about $4.9 billion. WellPoint says it will fund the acquisition with available cash, commercial paper and by issuing new debt.

"We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees," WellPoint Chair, President and CEO Angela Braly said in a statement.

Once the buyout is complete, WellPoint and its affiliated Medicaid plans will serve more than 4.5 million beneficiaries of state sponsored health care programs.

It will also have a presence in 13 states with significant numbers of people eligible for managed care under dual government programs, including the four largest states that have a combined $105 billion in annual dual eligible spending.

The transaction is expected to close in 2013's first quarter. It still needs certain regulatory approvals and the approval of Amerigroup stockholders.

The deal is expected to add to WellPoint's 2013 earnings per share and add more than $1 per share by 2015. The company is maintaining its 2012 earnings outlook.

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Your health insurer may owe you money

If you have health insurance, you may be getting some money back this summer.

Consumers and small businesses will receive an estimated $1.3 billion in premium rebates from insurers that last year failed to meet new federal health care reform standards designed to purge excessive administrative costs and profit-taking from America's health plans.

The new standard, known as the "medical loss ratio," or MLR, requires an insurer to spend at least 80 percent of your premium directly on your medical care if you purchased your own policy, or 85 percent if you're insured under an employer's plan. When those marks are missed, the Affordable Care Act requires the insurance company to refund the difference. The first of these annual rounds of insurance rebates, which cover premiums collected last year, must be issued by Aug. 1.

The latest rebate estimates by the nonpartisan Kaiser Family Foundation are based on an analysis of 2011 premium data that insurers filed with the National Association of Insurance Commissioners.

The Kaiser study projects that nearly one-third (31 percent) of consumers who buy their own insurance will receive rebates, and so will more than a quarter (28 percent) of small businesses that insure their workers. About one-fifth (19 percent) of major employers are expected to get rebates -- $541 million worth.

"In total amounts, the large-group market is expecting the most rebates, but that is because that's the way most people receive private insurance," says Cynthia Cox, a Kaiser fellow and co-author of the study. "If you look at it per person, those who buy insurance on their own can expect some of the highest rebates."

How much can you expect? The study estimates that enrollees in the individual market will receive rebates of $127, on average. Small businesses will get rebates averaging $76 for each enrolled employee, and big businesses will receive an average of $72 per enrollee. The largest rebates are expected in Texas ($186 million) and Florida ($149 million). Hawaii is the only state where no insurer will be required to issue a rebate.

Kaiser says businesses that receive insurance rebates will, in some cases, pass the money on to employees.

Brian Chiglinsky, spokesman for the federal Centers for Medicare & Medicaid Services, says rebates will be issued by check or as a credit toward the next premium.

"In either case, it will be accompanied by a letter that explains what the MLR is, what their rate was and why the company didn't meet it," he says. "Companies that do meet the MLR standard should also send a notice that explains MLR and says, 'We've met this standard, so you're getting fair value for your premium dollar.'"

While consumers are likely to welcome the rebates, the MLR program is really designed to punish insurers that spend too much on things such as overhead and executive bonuses.

"Yes, consumers should feel great to get some money back," says Chiglinsky. "But they should bear in mind that it's money they should not have been charged in the first place." He adds that the MLR results, which will be posted on Healthcare.gov this fall, should help consumers shop for insurance offering the best value once the new state health exchanges open in 2014.

Health insurers are not thrilled with the insurance rebates program, to put it mildly, according to Robert Zirkelbach, spokesman for America's Health Insurance Plans, an industry trade group.

"MLR is the absolute wrong way to get health care costs under control," he says. "Instead of focusing on what the data shows is the real driver of rising health insurance premiums, which is underlying medical costs, it is capping health plan administrative costs, which have been consistent for about the last decade. "

Deborah Chollet, a senior fellow at Mathematica Policy Research in Washington, D.C., says some rebates may be the result of foot-dragging by insurers in the 26 states challenging the health care reform law in the Supreme Court.

"Some carriers in those states are kind of in denial about the Affordable Care Act," she says. "They've known where they stood on these rebates since last fall. They're busy now calculating good 2013 premiums."

Chollet, who is helping states set up the new health exchanges, says the MLR program and its insurance rebates were designed to put the onus on insurers to find other profit streams, ideally by renegotiating with service providers to lower health care costs.

"I think what HHS (the Department of Health and Human Services) is saying is: 'This shouldn't be the consumer's problem, it should be the insurance company's problem,'" she says. "Their much-lauded nimbleness needs to come into play now."

Will the MLR test stand if the Supreme Court rules against the health care reform law?

"That is the multibillion-dollar question," says Chollet, "and I don't see anybody placing bets these days."

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Biggest Health Insurer Will Keep Parts of 'Obamacare,' Regardless of Court Ruling

UnitedHealthcare, the nation’s largest health care provider, will keep major and popular parts of President Obama’s health care initiative, regardless of how the U.S. Supreme Court rules.

The company announced Monday that it plans to continue to provide customers with preventive health services without co-pays or out-of-pocket charges. The company will also allow parents to keep children on their health plans until age 26.

UnitedHealthcare will also observe the law’s prohibition against lifetime limits on insurance payouts and canceling coverage after a patient gets sick, unless that patient intentionally lied on the insurance application.

The announcement affects roughly 9 million consumers in the U.S. The U.S. Supreme Court is reviewing several major challenges to the law, and is expected to issue rulings this month that could dispatch all or part of the law.

“The protections we are voluntarily extending are good for people’s health, promote broader access to quality care and contribute to helping control rising health care costs,” Stephen J. Hemsley, president and chief executive of UnitedHealth Group, said in a statement. “These provisions are compatible with our mission and continue our operating practices.”

Health and Human Services' chief health information technology officer, Farzad Mostashari, said it was part of a larger trend of the health reform law delivering permanent improvements to the health care industry.

"It goes to show how there are some changes afoot that are in the direction that we need to move," Mostashari told National Journal in an interview. "I'm greatly encouraged by what a lot of the commercial plans are doing."

The health insurance industry lobby also welcomed United's announcement.

"This is an example of health plans stepping up to give consumers peace of mind about their health care coverage," Americans Health Inusrance Plans Spokesman Robert Zirkelbach said in an e-mail.

Meghan McCarthy contributed.

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Health insurer WellPoint to buy 1-800 Contacts

INDIANAPOLIS (AP) — WellPoint Inc. plans to buy contact lens retailer 1-800-Contacts Inc. in a deal that would give the insurer its first direct-to-consumer business outside selling individual health coverage.

Terms of the deal with private equity firm Fenway Partners were not disclosed.

WellPoint, based in Indianapolis, said Monday that the eyewear company will help diversify its revenue sources with a high-margin business. WellPoint is the second-largest U.S. health insurer based on both revenue and enrollment, trailing only UnitedHealth Group Inc.

It runs Blue Cross Blue Shield plans in 14 states, including California and New York.

Health insurance is WellPoint's main product, and the insurer said in April its total medical membership fell nearly 2 percent to 33.7 million people compared to the end of last year. The company lost enrollment in its two largest membership segments, plans that provide health insurance to employees of small businesses and large, national accounts.

1-800 Contacts fills orders for contact lens by phone, internet, mail or fax. It sells disposable and color lenses among other types. It also offers brands like Acuvue, Focus, FreshLook and PureVision and operates a partnership with Wal-Mart Stores Inc., the world's largest retailer.

It also sells eye glasses through its glasses.com website.

WellPoint Chairwoman and CEO Angela Braly said in a statement that 1-800 Contacts serves about 3.3 million customers, but it comes with a significant growth opportunity because there are more than 38 million people wearing eye contact lenses and more than 140 million people wearing eye glasses in the United States.

The deal requires regulatory approvals and customary closing conditions but is expected to close in the third quarter.

WellPoint said it will be financed with cash on hand, and its 2012 earnings will take a hit of 4 cents per share due to transaction and integration costs.

Its shares finished at $66.36 on Friday. They are up 17 percent from their 52-week low of $56.61 in August. They peaked at $80.90 last July.

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Health Net shares sink after insurer cuts forecast

WOODLAND HILLS, Calif. (AP) -- Health Net Inc.'s first-quarter loss narrowed compared to last year, but the managed care company slashed its 2012 earnings outlook for its continuing operations due to some unexpected costs, and its performance fell far short of analyst expectations.

The Woodland Hills, Calif., company's shares plummeted 27 percent, or $9.72, to $26.60, in midday trading Thursday.

The insurer said Thursday it lost $26.6 million, or 32 cents per share, in the three months that ended March 31. That compares to a loss of $108.2 million, or $1.16 per share, the year before, when litigation and restructuring costs weighed on its performance.

Adjusted earnings were 10 cents per share.

Total revenue fell 16 percent in the quarter to $2.83 billion, as money from government contracts fell. However, health plan services premiums rose 7 percent to $2.6 billion.

Analysts surveyed by FactSet expected, on average, earnings of 60 cents per share on $2.91 billion in revenue.

Health Net administers Medicaid and Medicare coverage and works with TriCare, which provides health insurance for active and retired military members and their families. It also provides behavioral health, substance abuse and employee assistance programs.

The company said in a statement it took an approximately $67 million hit in the quarter because claims leftover from the previous quarter came in higher than expected due in part to "significant" delays in claims submissions. Health Net attributed that to a new Health Insurance Portability and Accountability Act billing format.

Health Net now forecasts 2012 earnings forecast for its Western region and government contracts segments to range between $2.35 and $2.50 per share. In February, it said it would earn $3.30 to $3.40 per share.

The reduction was disappointing and larger than the impact from the leftover claims, Bernstein analyst Ana Gupte said in a research note. She expects earnings of $3.31 per share.

Health Net absorbed several other charges in the quarter. It recorded an $18.5 million loss from a Medicare prescription drug business it sold to a CVS Caremark Corp. affiliate after the quarter ended. It also recorded $23.1 million in expenses tied to Northeast operations it has sold.

Total health plan enrollment climbed 1.2 percent to about 3 million people.

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Health insurer Aetna's 4Q profit jumps 73 percent

INDIANAPOLIS (AP) — Health insurer Aetna Inc.'s fourth-quarter net income jumped 73 percent, as it continued to benefit from low use of health care and some key expenses fell.

The Hartford, Conn., insurer's earnings and revenue topped Wall Street expectations due in part to slower-than-expected growth in health care use, a trend that has helped insurers routinely outperform the past several quarters. Many analysts expect this trend to continue into 2012.

Aetna said Wednesday that it earned $372.6 million, or $1.02 per share, in the three months that ended Dec. 31. That's up from $215.6 million, or 53 cents per share, in the 2010 quarter. Revenue climbed slightly to $8.57 billion.

Earnings excluding capital gains and other items were 97 cents per share.

Analysts surveyed by FactSet expected, on average, earnings of 96 cents per share on $8.43 billion in revenue. Analysts typically exclude one-time items from their estimates.

Aetna is the third largest commercial health insurer based on both enrollment and revenue, trailing WellPoint Inc. and UnitedHealth Group Inc.

Health care costs, or the amount Aetna paid in medical claims, fell 2 percent in the quarter to $5.59 billion. The insurer also saw an after-tax benefit of about $63 million because claims leftover from prior periods came in lower than expected.

Aetna's operating expenses also fell 3 percent to $1.83 billion.

Health insurance is Aetna's main product, but the company also sells dental, group life and disability coverage. Its medical membership fell slightly, to about 18.5 million people, compared with the 2010 quarter.

Aetna reaffirmed its forecast for 2012 adjusted earnings of $5 per share. Analysts expect $5.08 per share.

Many say a pullback in consumer spending due to the sluggish economy is behind the slower medical use growth.

WellPoint said last week that health care use rose in the fourth quarter but remained lower than normal, and trends were affected more by the cost of care than the number of people receiving it. The insurer saw bigger hospital bills from more acute cases rather than more people heading to the hospital.

WellPoint missed analyst expectations with its performance, but that was largely due to a hit it took from its Medicare Advantage business.

UnitedHealth said its medical costs climbed in the quarter, but price increases for inpatient hospital care, not use, were the biggest reason behind it. Even so, UnitedHealth expects use to climb steadily through 2012.

Aetna's shares rose 95 cents, or 2.2 percent, to $44.65 in premarket trading.

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Health insurer Aetna's 4Q profit jumps 73 percent

INDIANAPOLIS (AP) -- Health insurer Aetna says its fourth-quarter net income jumped 73 percent, as it continued to benefit from low medical utilization and some key expenses fell.

The U.S.-based insurer earned $372.6 million, or $1.02 per share, in the three months that ended Dec. 31. That's up from $215.6 million, or 53 cents per share, in the 2010 quarter. Revenue climbed slightly to $8.57 billion.

Earnings excluding capital gains and other items were 97 cents per share.

Analysts forecast earnings of 96 cents per share on $8.43 billion in revenue.

Aetna is the third largest commercial health insurer based on both enrollment and revenue, trailing WellPoint and UnitedHealth. Its medical membership fell slightly, to about 18.5 million people, compared with the 2010 quarter.

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French health insurer to sue PIP's boss

http://www.euronews.net/ France's national health insurance agency says it is to sue the boss of breast implant maker PIP, Jean-Claude Mas.

The French health minister says he must be found, as Mas has not been seen or heard from since the scandal of the faulty implants broke, which could affect 300,000 women around the world. His lawyer says he is still in France.

Accused of using substandard silicon in PIP's implants to fatten profits, one surgeon says Mas had a more sales than medical approach.

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