Anthem Inc.

Anthem Inc.

Type	Public
Traded as	NYSE: ANTM S&P 500 Component
Industry	Managed health care
Founded	Anthem Insurance and WellPoint Health Networks merger in 2004
Headquarters	Indianapolis, Indiana, United States
Key people	Joseph R. Swedish (CEO)
Products	Blue Cross Blue Shield
Revenue	US$85 Billion (FY 2016)[1]
Net income	US$2.46 Billion (FY 2016)[1]
Total assets	US$58.96 Billion (FY 2012)[2]
Total equity	US$23.80 Billion (FY 2012)[2]
Number of employees	37,000+
Website	www.antheminc.com

Company headquarters on Monument Circle in Indianapolis

Anthem Inc. is an American health insurance company founded in the 1940s, prior to 2014 known as WellPoint, Inc. It is the largest for-profit managed health care company in the Blue Cross and Blue Shield Association. It was formed when Anthem Insurance Company acquired WellPoint Health Networks, Inc., with the combined company adopting the name WellPoint, Inc.; trading on the NYSE for the combined company began under the WLP symbol on December 1, 2004. On December 3, 2014, WellPoint changed its corporate name to Anthem Inc., and its NYSE ticker changed from WLP to ANTM.^[3][4]

History

Anthem Insurance Company

Anthem Insurance Company grew out of two Indianapolis, Indiana based mutual insurance companies, Mutual Hospital Insurance Inc. and Mutual Medical Insurance Inc. formed in 1944 and 1946.^[5] The companies grew significantly, controlling 80% of the medical insurance market in Indiana by the 1970s. In 1972 they came together to create a joint operating agreement,^[6] and merged in 1985 as parent company, Associated Insurance Companies, Inc, to form Blue Cross and Blue Shield of Indiana.^[6][7][8]

In 1986 Associated Insurance Companies changed its name to The Associated Group (TAG) to reflect its expanded focus,^[7] and began heavily expanding outside Indiana, acquiring numerous insurance companies and creating new subsidiaries throughout the late 1980s through the mid-1990s.

Formerly Anthem Inc. was an insurance company which began in the 1980s as a spin-off of the group insurance operations of American General Insurance.

Anthem Blue Cross and Blue Shield was created as part of the merger of The Associated Group with Community Mutual Insurance Co. of Cincinnati.^[9]

From its move to a publicly traded company in 2001 until its final merger in 2004, it merged the Blue Cross Blue Shield organizations of several states to achieve economy of scale, converting them in the process from non-profit to for-profit status. In late 2004, Anthem and WellPoint merged, with the combined company taking the WellPoint name. That Anthem no longer exists as a company, but the Anthem Blue Cross and Blue Shield brand name is used by WellPoint in 11 states.

In October 2001, Anthem demutualized and conducted an initial public offering of common stock. WellPoint, Inc. (formerly Anthem, Inc.) was formed when WellPoint Health Networks Inc. and Anthem, Inc. merged in 2004 to become the nation's leading health benefits company.

WellPoint Health Network Inc.'s predecessor was Blue Cross of California, which was founded in 1982 with the consolidation of Blue Cross of Northern California (established in 1936) and Blue Cross of Southern California (established in 1937). WellPoint was formed in 1992 to operate Blue Cross of California's managed care business. In 1993, Blue Cross of California spun off its managed care business into a separate publicly traded entity, WellPoint Health Networks Inc. In 1996, Blue Cross of California completed the conversion of all its business to for-profit status, resulting in a restructuring that designated WellPoint Health Networks Inc. as the parent organization. Anthem and WellPoint achieved a portion of this growth through mergers and acquisitions.

Wellpoint, Inc. was formed in November 2004 following a merger of Anthem and WellPoint Health Networks Inc.^[5] The merger was structured as Anthem acquiring WellPoint Health Networks and rebranding itself WellPoint, Inc. When the deal was originally announced in October 2003, the merger was set at $16.5 billion.^[10] The fair market value of the merger when completed in December 2004 was approximately $20.8 billion.^[10] At the time of the merger's completion, WellPoint was the largest American insurer.^[10]

In December 2014: WellPoint changed its corporate name to Anthem Inc..

Timeline

Anthem/Associated Insurance

• 1940's: Anthem began in Indianapolis, Indiana as Mutual Hospital Insurance Inc. and Mutual Medical Insurance Inc.^[5] The companies grew significantly, controlling 80% of the medical insurance market in Indiana by the 1970s.^[5]
• 1972: The two firms, now known as Blue Cross of Indiana and Blue Shield of Indiana, entered into a joint operating agreement.^[6]
• 1980's: Anthem Inc. began as an insurance company as a spin-off of the group insurance operations of American General Insurance.^[9]
• 1985: The two merged into Associated Insurance Companies, Inc, a holding company.^[7][8] But usage of the name "Anthem" persisted.
• 1986: Associated Insurance Companies began expanding outside of Indiana, acquiring numerous insurance companies and creating new subsidiaries.^[5][7]
• 1986: Associated Insurance Companies changed its name to The Associated Group to coincide with its expanded focus.^[7] Associated Insurance's acquisitions included Anthem Health, Inc., a national company offering group life and health insurance; Raffensperger, Hughes & Co., Inc., Indiana's largest investment bank; and the Shelby Insurance Co., a property and casualty insurance business.^[5]

The Associated Group

• 1989: The Associated Group founded Acordia, brokerage that sold and serviced insurance and employee benefit programs.^[5][11]
• 1992: The Associated Group took Acordia.^[6]
• 1993: Acordia acquired American Business Insurance for $130 million and the Federal Kemper Insurance Company for $100 million.^[5]
• 1993: The Associated Group bought Southeastern Mutual Insurance Company, the operator of Blue Cross and Blue Shield of Kentucky.^[5][12] The deal was the first cross-state merger of major Blues plans in America.^[5] By the end of 1993, Associated Insurance posted annual profits of $65.4 million with $3.4 billion in revenue.^[5]
• 1995: The Associated Group acquired Community Mutual Insurance (a provider of Blue Cross and Blue Shield insurance plans in Ohio with over 1.9 million policy holders), then set up Anthem Blue Cross and Blue Shield.^[5][8]
• 1995: The Associated Group began offering its Blue Cross Blue Shield products to consumers under the Anthem name.
• 1996: The Associated Group changed its name to Anthem Insurance Company.^[9]

Anthem Blue Cross

Anthem Blue Cross (in full 'Anthem Blue Cross and Blue Shield') is a subsidiary of insurance giant Anthem Inc.. Anthem has about 800,000 customers, and has more individual policyholders in California than any other insurer. It is an independent licensee of the Blue Cross Blue Shield Association based in Thousand Oaks, California.^[13] Wellpoint had a net income of $2.49 billion in 2008, and $4.7 billion in 2009.^[14] Leslie Margolin became Anthem Blue Cross's company president in January 2008, and also was chief executive officer of the firm’s Life and Health affiliate. Joseph Swedish is currently chief executive officer of the company.^[15]

The logo of Anthem Blue Cross Blue Shield

Anthem Insurance Company

• 1996: Anthem began to exclusively focus on healthcare benefits.^[5] Anthem later added 850,000 policy holders with its purchase of Blue Cross and Blue Shield companies in New Hampshire, Colorado, Connecticut, Maine and Nevada.^[5]
• 1997: Anthem acquires Blue Cross and Blue Shield of Connecticut.
• 1997: Anthem Group sold Acordia to a group of private investors.^[11]
• 1999: Anthem acquires Blue Cross and Blue Shield of New Hampshire and Blue Cross and Blue Shield of Colorado and Nevada.
• 1999: Anthem Group's revenue had grown to $6.3 billion. Among its customer base were 2.4 million PPO enrollees and 964,000 with HMOs.^[5]
• 2000: Anthem acquires Blue Cross Blue Shield of Maine.
• October 2001: Anthem converted from a mutual insurance company to a publicly held stock company, which made it the 4th largest public managed health care company in America.^[5]
• 2002: Anthem acquires Trigon Healthcare of Virginia, a Blue Cross and Blue Shield plan in Virginia, the largest insurer in Virginia, for $4.04 billion. Associated Insurance reached 11.9 million members

Blue Cross of California

Blue Cross of California was WellPoint Health Network Inc.'s predecessor

• 1982: Blue Cross of California was founded with the consolidation of Blue Cross of Northern California (established in 1936) and Blue Cross of Southern California (established in 1937).
• 1992: WellPoint was formed to operate Blue Cross of California's managed care business.
• 1993, Blue Cross of California spun off its managed care business into a separate publicly traded entity, WellPoint Health Networks Inc.^[16] Blue Cross of California retained 80% of the company and had "nearly all" of the company's voting shares.^[17]
• January 1993: Blue Cross California became an independent for-profit subsidiary with an IPO.^[16] Blue Cross of California retained 80% of the company and had "nearly all" of the company's voting shares.^[17]
• 1996: Blue Cross of California completed converting all its business to for-profit status, resulting in a restructuring that designated WellPoint Health Networks Inc. as its parent organization. After this, WellPoint Health Networks Inc. began heavy expansion.

WellPoint Health Networks

• April 1996: WellPoint completed its acquisition of Massachusetts Mutual Life Insurance Company's group life and health insurance subsidiaries for approximately $380 million.^[18] With the acquisition, WellPoint had nearly 4 million policy holders, which made it the second largest publicly held managed health company in the US.^[5]
  • WellPoint continued its expansion and acquired into 10 other states such as Massachusetts, New York, New Jersey, and offer life, disability, and dental insurance to all its rosters.^[5]
• March 1997: WellPoint acquired the group health and life businesses of John Hancock Mutual Life Insurance Co. for $86.7 million.^[19] With this acquisition, WellPoint expanded its presence into Michigan, Texas, and the mid-Atlantic and gained a unit that concentrated on serving the needs of large employers.^[5]
• 2000: By then Wellpoint's net income was $342.3 million with revenues of $9.23 billion.^[5]
• 2000: WellPoint acquires PrecisionRx, a mail service pharmacy fulfillment center in Texas.
• 2001, WellPoint acquired Rush Prudential Health Plans, a Chicago provider, for $204 million.^[20]
• March 2001: WellPoint acquired Cerulean Companies, the parent company of Blue Cross Blue Shield of Georgia.^[5]
• 2002: WellPoint acquired RightChoice Managed Care, a Missouri-based company, for $1.5 billion in 2002.^[5]
• WellPoint acquires HealthLink in the mid-West.
• 2002: WellPoint acquires MethodistCare in Houston, Texas.^[5]
• 2003: WellPoint acquires Golden West Dental and Vision in Camarillo, California.
• 2003: WellPoint acquires Cobalt Corp. and its family of companies, including Blue Cross and Blue Shield United of Wisconsin.
• October 2003: Anthem announced it would acquire WellPoint Health Networks for $16.5 billion.^[10]

WellPoint, Inc.

• November 2004: Wellpoint, Inc. was formed by merging of Anthem Insurance Company and WellPoint Health Networks Inc.^[5] The merger was structured as Anthem acquiring WellPoint Health Networks and rebranding itself WellPoint, Inc. When the deal was originally announced in October 2003, the merger was set at $16.5 billion.^[10] WellPoint still used Anthem as the brand name under which it operated. It sold its Blue Cross and Blue Shield products in 11 states. Ultimately, Anthem became the name that consumers knew the company as.^[21]
• December 2004: The Anthem and WellPoint Health Networks deal was completed.^[10] The fair market value of the acquisition at time of its completion was approximately $20.8 billion.^[10] The newly merged company was renamed WellPoint, Inc.^[10]
• 2005: WellPoint acquired Alexandria, Va.-based Lumenos, a provider of consumer-driven health plans, for $185 million.^[22] Lumenos was the pioneer and market leader in consumer-driven health plans.
• 2005: WellPoint, Inc. and WellChoice, Inc., merge, making New York the 14th state in which WellPoint is a Blue Cross Blue Shield licensee.
• December 2005: WellPoint acquired WellChoice, a New York-based Blue Cross Blue Shield provider, for approximately $6.5 billion.^[23]
• 2007: WellPoint acquired Chicago-based American Imaging Management, the leading radiology benefit management company, that creates software to help physicians choose cost-effective locations for their patients to receive medical imaging tests.^[24]
• 2007: WellPoint, Inc. acquires Chicago based American Imaging Management (AIM), the leading radiology benefit management company.
• 2008: WellPoint acquired Resolution Health, a firm that analyzes patient history for potential medical problems such as adverse drug interactions.^[25]
• 2009: WellPoint acquired DeCare Dental (a dental insurance firm).^[26]
• 2011: WellPoint acquired CareMore, a Cerritos, California-based company that provides insurance and care centers for elderly patients.^[27]
• 2012: WellPoint acquired Amerigroup for $4.9 billion, anticipating significant revenue growth due to Medicaid expansion under the Affordable Care Act.^{[5][28][29][30]}
• 13 August 2014: WellPoint announced it intended to change its name to Anthem, Inc.^[3]

Anthem name revived

• December 2014: WellPoint changed its corporate name to Anthem Inc. and its NYSE ticker symbol from WLP to ANTM.^[3][4]
• December 2014: Anthem Inc. announced that it was to acquire Simply Healthcare Holdings, Inc., a leading Medicaid and Medicare managed care company in Florida.^[31]
• June 2015: Anthem announced an offer to acquire Cigna, a global health insurance service company, for more than $47 billion in cash and stock.^[32]
• July 2015: Anthem and Cigna announced that they have entered into a definitive agreement, valuing the transaction at $54.2 billion on an enterprise basis.^[33]
• February 2017: A US District Court ruling blocked the Cigna merger on anticompetitive grounds.^[34] In February 14, 2017, Cigna Corp. called off its $48 billion merger agreement with Anthem Inc., with Anthem stating it would "continue to enforce its rights under the merger agreement and remains committed to closing the transaction."^[35]

Quality of care

In the category of "Meeting National Standards of Care" California's state patient advocacy office gave Anthem a rating of 2 out of 4 stars in its 2011 annual report card.^[36] In 2014 it received 3 out of 4 stars in the same category.^[37]

Controversies

Giving for uninsured

In 2007, WellPoint pledged to spend $30 million over three years, through the company's charitable foundation, to help the uninsured. In March 2010, the Los Angeles Times reported that WellPoint's tax records and website showed that the company gave only $6.2 million by 2009. The company disputed that, saying that the foundation did fulfill its $30-million commitment by mid-2009, but declined to provide any financial details to support its position.^[38]

Policy cancellations

In 2007, the California Department of Managed Health Care (DMHC), a California state regulatory agency, investigated Anthem Blue Cross's policies for revoking (rescinding) health care insurance policies. The DMHC randomly selected 90 instances where Anthem Blue Cross canceled the insurance of policy holders who had been diagnosed with costly or life-threatening illnesses, to find how many of these cancellations were legal. The agency concluded that all these cancellations were illegal. "In all 90 files, there was no evidence [that Blue Cross], before rescinding coverage, investigated or established that the applicant's omission/misrepresentation was willful," the DMHC report said.^[39][40]

In July 2008, Anthem Blue Cross agreed to a settlement with the California Department of Managed Health Care. To resolve allegations of improper policy rescissions (cancellations), WellPoint paid $10 million and reinstated 1,770 policy-holders whose plans they had cancelled. They also agreed to provide compensation for any medical debts incurred by these policy-holders in the meantime. However, WellPoint did not officially admit liability.

In April 2010, a report in Reuters alleged that Wellpoint "using a computer algorithm, identified women recently diagnosed with breast cancer and then singled them out for cancellation of their policies."^[41][42] The story not only caused considerable public outrage, but led Secretary of Health and Human Services, Kathleen Sebelius, and President Barack Obama, to call on WellPoint to end the practice.^[43]

In 2011 Anthem Blue Cross began cancelling policies of members who had been paying premiums with credit cards, sometimes without calling or emailing the member ahead of time.^[44]

Opposition to health care reform

The former Vice President for Public Policy and External Affairs at WellPoint, Elizabeth Fowler, is the Senior Counsel to Max Baucus, the chairman of the Senate Finance Committee and a leading opponent of the public option in health care reform.^[45]

In August 2009, WellPoint’s Anthem Blue Cross unit, the largest for-profit insurer in California, contacted its employees and urged them to get involved to oppose Congress' plan for health care reform. Consumer Watchdog, a nonprofit watchdog organization in Santa Monica, asked California Atty. Gen. Jerry Brown to investigate its claim that WellPoint had illegally pushed workers to write to their elected officials, attend town hall meetings and enlist family and friends to ensure an overhaul that matches the firm’s interests. According to Consumer Watchdog, California's labor code directly prohibits coercive communications, including forbidding employers from controlling, coercing or influencing employees' political activities or affiliations. WellPoint had not been contacted by the California attorney general and had not seen any complaint.^[46]

Through 2010 and into 2011, WellPoint senior executives met monthly with executives of other major health insurers to blunt the effect of the health care reform law.^[47]

2009 premium increase in Maine

In 2009, Anthem Health Plans of Maine, a WellPoint subsidiary, sued the state of Maine for the right to increase premiums further.^[48] Since Maine licenses insurance companies through its Department of Insurance, Anthem would need the state's permission to raise rates.^[49] The Court disagreed with Anthem and found that, unlike other forms of insurance, the Maine Insurance Code does not require the Superintendent to consider profits at all.^[50]

2010 premium increase in California

In February 2010, WellPoint announced that some Anthem Blue Cross individual policies in California would see a rate increase as high as 39%. This announcement resulted in an investigation by the US Federal and California government regulators.^[13] Because of this, Anthem Blue Cross gained worldwide media attention and became a poster child for the problem of rising US health costs, when it announced that it was raising rates on some individual policy holders by as much as 39% as of March 2010.^[13] The rate increase came one year after Anthem had raised rates 68% on individual policy holders.^[51] This announcement resulted in an investigation by the US Federal and California government regulators.^[13]

To explain the latest rate increases, some which were four times the rate of medical inflation, Anthem said the company has experienced a death spiral, as unemployment and declining wages led healthy customers to drop their insurance, the remaining risk pool becomes sicker and more expensive to insure, and, in turn, prices are forced up and push more people out of the market.^[52]

In response to the outrage from politicians and consumers, Anthem postponed the rate increase until May 1, 2010.^[53] Given Anthem’s rate increase plans, Senator Dianne Feinstein, Democratic Senator of California, has proposed giving the federal government authority to block insurance premium hikes considered to be "unjustified".^[54]

Reclassifying expenses

On 17 March 2010, WellPoint announced it was reclassifying some of its administrative costs as medical care costs in order to meet new loss ratio requirements under the health care law, which requires insurers to spend at least 80% or 85% of customer premiums on health care services, depending on the type of plan.^[55]

2009-10 security breach

In June 2010, Anthem sent letters to 230,000 customers in California warning them that their personal data might have been accessed online. After a routine upgrade in October 2009, a third-party vendor stated that all security measures had been properly reinstated, when in fact they had not. As a result, personal information of thousands of coverage applicants who were under the age of 65 was exposed in the open. After a Los Angeles-area woman found that her application for coverage was publicly available, she filed a class-action lawsuit against Anthem. While gathering evidence for the proceeding, the woman's lawyers downloaded some confidential customer information from Anthem's website and alerted Anthem about the breach. According to the lawyers, confidential information had remained out in the open for five months.^[56][57]

Denying benefits

In May 2014, Anthem Blue Cross refused to pay for the hospitalization of a Sonoma County, California man for stage four cancers, although he had paid Anthem over $100,000.00 in premiums.^[58][59] Anthem ended up paying for coverage following public outcry.^[60]

2015 medical data breach

On February 4, 2015, Anthem, Inc. disclosed that criminal hackers had broken into its servers and potentially stolen over 37.5 million records that contain personally identifiable information from its servers. According to Anthem, Inc., the data breach extended into multiple brands Anthem, Inc. uses to market its healthcare plans, including, Anthem Blue Cross, Anthem Blue Cross and Blue Shield, Blue Cross and Blue Shield of Georgia, Empire Blue Cross and Blue Shield, Amerigroup, Caremore, and UniCare.^[61] Healthlink says it was also a victim.^[62] Anthem says the medical information and financial data was not compromised. Anthem has offered free credit monitoring in the wake of the breach.^[63] According to Bloomberg News, China may be responsible for this data breach. Michael Daniel, chief adviser on cybersecurity for President Barack Obama, said he would be changing his own password.^[64] According to The New York Times about 80 million company records were hacked, and there is fear that the stolen data will be used for identity theft.^[65] On February 7, 2015 Elizabeth Weise wrote in USA Today that the compromised information contained names, birthdays, medical IDs, social security numbers, street addresses, e-mail addresses and employment information, including income data.^[66]

References

Further reading

• International Directory of Company Histories, Vol. 25. St. James Press, 1999
• Anders, George, "Blue Cross of California Sells Stake in WellPoint Health for $476 Million," Wall Street Journal, January 28, 1993.
• Connolly, Jim, "California Blue Cross Plans to Start For-Profit Sub," National Underwriter Life & Health-Financial Services Edition, September 14, 1992.

External links

• Wellpoint Website

• • Business data for Anthem Inc.: Google Finance
  • Yahoo! Finance
  • Reuters
  • SEC filings
• Article about unethical practices of Blue Cross of California
• Sourcewatch profile
• Center for Responsive politics profile (Blue Cross/WellPoint)
• Investors
• Anthem Insurance and Anthem Blue Cross web site
• Blue Cross Blue Shield national web site
• Summary of Anthem rate increase news
• Center for Responsive politics profile (Blue Cross/WellPoint)- www.opensecrets.org