WellPoint CEO sees expansion amid reform

Angela Braly, president and chief executive officer of WellPoint Inc., speaks at the Reuters Health Summit in New York, November 9, 2009.

NEW YORK (Reuters) - Health insurer WellPoint Inc (WLP.N) is interested in expanding its Medicare business despite the likelihood of cost cuts from a U.S. healthcare overhaul, the company's chief executive told Reuters on Monday.

Angela Braly, speaking at the Reuters Health Summit in New York, said WellPoint continues "to look at the opportunity for acquisitions," but a "major acquisition of a health insurance company would be difficult until there is more clarity" on health reform.

The CEO said WellPoint will also continue to pursue Medicaid business, with the key being whether there is "an actuarially sound rate that would be paid" by states administering the federal coverage plan for the poor.

She also said health insurance premiums will rise if the health reform legislation passed by the House of Representatives on Saturday were to become law.

The bill "would actually raise the cost for those with coverage," Braly said. She cited "significant taxes and fees," as well as insurance market reforms that would have the impact of increasing coverage costs.

The CEO said a key issue is an enforceable mandate requiring individuals to purchase healthcare coverage. "We think if you can get people in the pool and keep them there, it will be affordable," Braly said.

She also said current healthcare proposals could force the company, the largest health insurer by membership, to resort to layoffs.

Asked how health reform might stress hospitals, she said, "Our perception is it could potentially bankrupt some hospitals, depending on the scenario" of eventual reforms, including "some significant hospitals."

In the event reform includes a public option plan, she said some hospitals could receive much lower reimbursements, in line with Medicare and Medicaid payments.

As hospitals go bankrupt, she said lost services would create an "access question" for patients.

"The question is whether we're solving or creating access problems in another way," Braly said.

She said the company's 2010 profitability will depend, in part, on the severity of the seasonal flu and H1N1 flu season. "We're anticipating it to have a significant impact on the fourth quarter and first quarter of 2010. We have seen a significant increase in Tamiflu and Relenza prescriptions."

She said the impact on the company will be easier to assess after getting the latest data on doctors' visits. But she noted that the costs of Tamiflu, Relenza and doctors' visits are not nearly as costly to the company as services rendered at hospitals.

WellPoint said last month that flu costs and Cobra coverage for workers who lost their jobs would raise its costs for 2010, resulting in lower operating earnings next year.

Braly said WellPoint expects to close on the $4.68 billion sale of its pharmacy benefit plan by year-end, with the expectation that "a significant part" of the proceeds would be used to buy back shares.

She said the company would "continue to evaluate" whether to use capital to pay a dividend to shareholders.

Shares of health insurers are trading at historic lows over concerns that the healthcare overhaul under debate in Congress will dramatically undercut their business, but the narrow passage of the House bill over the weekend and expectations for months of wrangling in the Senate helped shares on Monday.

WellPoint's shares, which have traded as low as $27.50 and as high as $55.73 over the past year, were up $1.14 or 2.2 percent, at $52.14 in afternoon trading on the New York Stock Exchange.

(Additional reporting by Ransdell Pierson; Editing by Matthew Lewis, Phil Berlowitz)