Wellpoint at Leerink Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Speaker: Ken R. Goulet
Executive Vice President-President and CEO, Commercial and Specialty Division, WellPoint, Inc

Probably put more effort into the exchanges than our competitors

“So I’d first say the focus we gave on it was probably more than our competitors…we’ve really put a lot of effort into exchanges. And we did feel that it was a transition of more affordable lower-cost networks combined with our brand would put us in a good position.”

We needed to because we figured there would be some attrition from small group

“We thought we needed to be because, as we have said, there will be some attrition from small groups into public exchanges, and we wanted to have a good catcher’s mitt for it.”

Had better data to price exchange products than others

“We have more data than most carriers because we are the largest individual carrier; we’re the largest small group carrier. And the pricing had to be positioned at a point we did it off our small group because we felt that there would be no medical underwriting; that the profile would be more like a small group, and that was our starting point before…I do know we’re the only ones that are saying we’re comfortable that it’s going to produce some margin for us this year. ”

There will be a lot more offerings on the exchange right now

“I would say going into next year, it’s important to know and we know that there will be more competition. In our markets, competition will be up 20% in number of carriers. Half of that will be the national carriers. So you referenced the U [United], but I would say there will be more carriers involved. There will be more product involved in our markets right now. There will be 50% more product being offered next year”

We all buy

“We’re all consumers. We all buy. And you buy by price and you buy by brand…the data we find is that people did sort initially by product. Then they sort by price, and then they choose on that price spectrum who they want. And the Blue brand makes a difference, depending on the geographic area, of about 3% to 5%. So someone will pay a little bit more for us than our competitors, but not a ton more. We need to be affordable.”

most people don’t shop around their insurance carrier

” I do think it’s sticky. We have done a lot of research going into it, but think of your car insurance or homeowners insurance. I know I can get a better deal if I go to Priceline and bid it this year, but I don’t bid it every year. Some of us stick as long as your year-over-year increase is rational.”

Honestly, I was nervous

“I do think our data gives us an incredible advantage going into it. I was quite honestly nervous, as you would be in running something, making a business proposition that large. But there was enough data to make a reasonable choice on what our pricing should be in each of our markets.”

Small group are moving to the exchange

“given that 80% of the people on our exchanges are subsidy eligible, if you’re a small employer group that is struggling to pay insurance costs and realizes if I put my people into the exchange 80% of them will get some sort of government subsidy, they see that that might be the right business decision for them.

So I do think we’re seeing a transition. I do think our book has more small group than Aetna. I don’t United’s book as close, but I think we had more to potentially lose up front, and we were aware of that and that was our strategy. We’re going to manage that transition.”

Healthcare costs may be stabilizing

“I actually think the landscape is changing some. Trends are being more stable. And while we’re pricing for potential upticks, and we really have to take our risk pools in mind, trend is a component of unit cost and utilization. And that’s exactly what it’s tied into, the number of units and the cost per unit. The cost per unit is being negotiated quite well at a physician and hospital level either through value pricing or through just normal traditional pricing. But the price increases that facilities and medical groups used to see, they’re not getting any more on that front.”

We do believe that pricing is not sustainable for the Hep C drugs, but not betting on it to decline any time soon

” we do believe that the pricing is not sustainable. We think that it – everyone can argue from different viewpoints. My job is to give affordable care to my members, and that’s my whole job. So when I look at that, I’m pretty comfortable saying I don’t think that price, even though there is a true value and it’s a wonderful drug and we cover it, it’s all for the right reasons. We feel that in specialty drug pricing that for larger populations like hep C, you have to be aware of the total population as well as the value when you’re assessing your cost to offset R&D and other items. So we’re hoping for a lower price, but we’re not betting on it right now.”

Wellpoint 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Wellpoint

Serve 1/9 Americans

“our 37 million members, representing roughly one in nine Americans.’

Robust growth from exchanges

“Applications especially near the end of the quarter were robust. Our March 31 membership includes applications through February 15th and we have enrolled over 400,000 members. Through the entire open enrollment period which officially ended April 15th, we now expect to add more than 600,000 members from public exchanges.”

“We are also serving approximately 100,000 members in private exchanges, which represent a new option for employers and their employees to obtain health coverage. Taken together, our overall enrollment growth and our positioning in the exchanges represent tangible examples of how our commitment to driving value for our customers is resonating with employers, individuals and their families on a daily basis.”

Exchange applicants match expectations, skew older. Younger people procrastinated

“For exchanges, the general characteristics of applicants, including average age are tracking well versus our expectations. We anticipated that exchange enrollees would generally be older than our legacy individual customers and our pricing assumptions for both on and off exchange products reflected this view. We did notice the average age of applicants decreased and further we got into the open enrollment period, indicating that younger age applicants signed up later in the period.”

PRoduct selection and actuarial value has been consistent with expectations

“Product selection has also been consistent with expectations as silver and bronze have been the two most popular metal levels by a wide margin. The actuarial value of the products selected by new applicants is also in line with our projections to date and we will continue to monitor product mix on a state-by-state basis.”

Brand name is helping

“We’re continued to see signs at our brand name and network quality are carrying more of an advantage in the market than we had expected. For example, there are geographies where we believe we are gaining share despite lower priced competition, which points to the value of our local market depth, knowledge, brand, reputation and networks.”‘

Small group member declines did exceed expectations

“with respect to our small group business, we continue to be mindful of the potential for employer coverage changes in light of the exchanges and we did see Q1 small group member declines above our expectations. However, this was offset by stronger large group membership trends in the quarter.”

Margins on exchange business coming in line with targets

“we are very pleased with the mix of business and probably more importantly the affirmation of the strategy we laid out around the design of our products and formulary. So our margins within our markets varied but they are still within our targeted range in total of 3% to 5% category.”

We’re in the sweet spot based on average age

“I would tell you that we saw in each day’s applications, the average age coming down in a meaningful fashion. And from our perspective, again, only time will tell but relative to the average age we’ve seen in that, we have hit the sweet spot. Relative to the claims activity, we have pushed over 90% of the claims we received in the first quarter through our predictive analytics and modeling we’ve done.”

Small group decline came faster than expected

“for all the areas that I performed on membership, the one that was a little surprising was the level of small group membership that actually no longer provided coverage post-January 1. So our early renewals were successful but for those, post that day, once the exchanges got up and running, we saw really — we missed our expectations in some of the small group in the quarter. From our perspective, we expected that to occur at some point in time. In fact, it occurred sooner was a little surprising but nonetheless we like the fact that our positioning on the exchanges is what is. It was more than offset though by a large group in and of itself in the exchanges.”

Happy with pricing strategy, better data in 2015

“we are really pleased with our strategy and the affirmation of our pricing strategy relative to what we built. We actually feel like we have more data to go into ’15 pricing than we did going into ’14 and we’ve got validation.”

Script trends a little better than expected on exchanges

“We’ve seen modest acceleration in script trends, but I think it’s important to recognize too for example on exchanges we expected acceleration in script trends, and in some ways the exchanges are so early but coming in slightly better than the acceleration we expected.”

Layoffs have substantially declined at large group employers

“I think what we are finding is we got good retention, we got good sales and it appears that the layoffs have substantially declined a large group employers.”

Wellpoint 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“In the fully insured marketplace, the rollout of public insurance exchanges began October 1, and there has been a lot of activity around this area. We remain optimistic about the long-term membership growth opportunity through exchanges.

But given that we are just 3 weeks into the open enrollment period, it is really too early to draw any definitive conclusions. Based on what we know to date in our continuing review of the competitive landscape, we remain generally pleased with our positioning across the exchange markets. That said, it will likely be sometime before we can get an accurate picture of what our initial volume on exchanges could be in 2014, and what the resulting risk profile might look like. We note that open enrollment runs through March 31.”

“We can say that initial interest in exchange products appears robust. As a point of reference, during the first week of open enrollment, we received over 35,000 calls into our service centers, which is more than double our historical weekly volume for individual business. In the second week, this increased to nearly 45,000 inbound calls as consumer awareness began to ramp up across the regions.”

“Moving now to Medicare. Performance was stronger than we expected in the quarter, driven primarily by improvements in our Medicare Advantage business. We are making progress with our Medicare Advantage turnaround efforts consistent with our multi-year improvement and product repositioning strategy. Based on our review of the 2014 competitive landscape, we continue to expect some modest membership attrition next year as we have worked to offset most of the pressures stemming from CMS reimbursement cuts through a variety of levers.”

“Medical enrollment totaled 35.5 million medical members as of September 30”

“we’ve been working on this for a couple of years now. We knew that there would be some choppiness going in. We’ve hired bubble staff, we have a number of folks ready to assist our customers, working through the issues, and we’re not at all surprised by the initial activity.”

“We’re still comfortable with our margin range of 3% to 5% based on the pricing we’ve put forward and what we have out there. I”

“For the on-exchange, we’re generally very pleased with our positioning across most states with the strategies we’ve built out and the segments we’re looking at. I would say it’s — we have good data going in, so we feel we’re pretty well positioned when we make pricing assumptions. And there are some — there’s a wider variance on the on-exchange. There are certain markets that have a wider variance than you would expect. I would stake Colorado as a good example amongst our markets. The pricing on a metal level between the highest and the lowest competitor is pretty varied in Colorado.”

“Relative to where I think the industry thought the duals would be a year ago, things are moving at a slightly slower pace, but nonetheless, the opportunity remains significant and we think we’re very well positioned. ”

“we feel that brand will carry our membership and the early results are too difficult to tell, but we do seem to be pulling in the membership on a brand basis. There’s a deep affiliation to the Blue brand.”

Wellpoint at Morgan Stanley Healthcare Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.\

“brand recognition, we have analyzed slice and dice from every possible perspective what we’ve uncovered is that there is a distinct advantage to the blues brand, it gives us multi-point advantage in the markets, we believe some pricing differential compared to competitors, may in fact be ameliorated by virtue of the blues brand.”

“we average about 30% market share across our 14 states. But if you would had delve deeper and actually curve out where the individual consumer makes the buying decision which is what the exchange was going to look like, the average of 47% market share. ”

“when you are thinking about pricing product and you are moving into this new market density matters. It just really matters because you are no longer in a medical underwriting world and you are trying to price based on statistical averages of what the population health status might be.”

“we know the individual market quite well, its almost 50% market. We have an average kind of consensus of what we think the medical loss ratio will look like for that group. We have a consensus what small group looks like because of our large market share in small group.

We don’t know the uninsured population, but we have enough data that says we can probably get a reasonable proxy and as we price for the new world though, its important to recognize that I mean, tow-thirds of the equation is not enough and you have to be somewhat conservative on the other third of the equation so you get more data. But at the same time, the way the risk coders work, the way the reinsurance works and the risk adjusting. No members created equal from the standpoint of targeting. There used to be a history that healthier was always better. But in the new world, its more about a balance pool.”

“So to try to go on strategically and only target healthier, or target only unhealthy is not an appropriate approach to pricing because you really need the law of large numbers as you move forward in this world.”

“The reinsurance is put in place to protect all carriers from getting adverse selection at a significant level. And the risk corridor is simply set up to cap profits in someway but to ensure that over time you are in an average margin as a pool, a broad industry pool.”