The Indianapolis Star (Indiana)
The nation’s health insurance industry just isn’t feeling much love.
In terms of honesty and trustworthiness, Americans rank it near the bottom of the barrel with Big Oil and Big Tobacco.
Insurance executives — including the chief executive of Indianapolis-based WellPoint — are feeling pressure to buff up their image amid tough industry competition and before the federal government and many state legislatures enact reforms that could alter their business significantly.
At stake is roughly $694 billion spent on health care each year in the United States through private insurers.
As the nation’s largest health benefits company, WellPoint has much riding on the public policy debate over how to meet the needs of the nation’s 46 million uninsured and control the hefty premium increases.
So WellPoint is convening focus groups involving thousands of consumers a year to get opinions on the company and industry, trying to measure their level of trust. In California, the company’s single largest market, it works with a public relations firm that specializes in crisis management.
And just last week, WellPoint Chairman and Chief Executive Larry Glasscock and other industry leaders met with President Bush at the White House to discuss health-care reform.
For David Stout of Muncie, the industry has a long way to go to gain trust and respect. He said he’s disgusted by WellPoint‘s profits, more than $3 billion in 2006, and Glasscock’s pay, which totaled $37.6 million in salary, bonus and stock awards the past three years.
“How can WellPoint, Anthem, or whatever insurance company, justify paying those obscene salaries, making those obscene profits, yet turn down people for reasonably priced coverage when they need it?” he asked.
Stout repeatedly has been turned down for individual coverage because he has hemochromatosis, a genetic disorder that results in too much iron in the blood. He said the condition is managed easily by periodic bloodletting, but numerous health insurers have rejected him as having a pre-existing condition.
He’s not alone in his feelings.
A 2005 poll by Harris Interactive showed that just 9 percent considered the health insurance industry “generally honest and trustworthy.” When people were asked specifically about managed care companies, the rating dropped to 5 percent. That’s barely above the 4 percent who trusted Big Tobacco and 3 percent who trusted Big Oil.
Glasscock pointed to that poll at a recent conference at which he talked with Wall Street analysts and investors about WellPoint‘s strategy and challenges.
“Clearly, building trust is needed,” he said in December, “and doing so is an important strategic goal for us.”
In California, WellPoint works with Sitrick and Co., a Los Angeles public relations firm specializing in crisis management that has served clients including Exxon, Halliburton and Rush Limbaugh.
Sitrick’s Web site said that it offers “reputation management” for clients involved in matters including liability claims, government investigations and all manner of business litigation.
WellPoint found itself in the headlines last year as its Blue Cross of California unit settled dozens of lawsuits in which former members claimed their policies were canceled once they got sick and ran up costly medical bills.
“WellPoint is willing to pay big to keep its name out of the headlines rather than fix internal processes to better serve patients,” said Jerry Flanagan, health-care policy director for the Foundation for Taxpayer and Consumer Rights. “Sitrick is known in the industry as the best firm to keep you out of the news.”
WellPoint spokesman Jim Kappel said Sitrick is one of many PR firms the company works with, but he declined to say specifically what services Sitrick is providing.
The California-based Foundation for Taxpayer and Consumer Rights has been highly critical of WellPoint and other insurers, even publishing a satiric cartoon depicting industry executives — including Glasscock — as marauding pirates singing to members who can’t afford their premiums.
Others say health insurers get a bad rap.
Steve Avila, associate professor of insurance at Ball State University, said many people do not appreciate just how much insurers pay when people get sick or hurt.
Avila said he would like to see a TV ad in which a health insurer shows a former cancer or car-accident patient saying: “It cost me $5,000, and the insurance company paid $500,000 to make me better.”
WellPoint is not alone in seeking to revamp its image.
Blue Shield of California, a major WellPoint rival, recently unveiled advertising based on the premise that consumers are dissatisfied with health insurers.
One spot features a man calling a customer service rep to decipher a confusing procedure code. He ends up trying to convince the insurer that he had his tonsils out when the company had him down for a circumcision.
“If you look broadly at the industry, everybody is sort of saying the same thing: ‘Trust us. We care for you,’ ” said Doug Biehn, vice president for corporate marketing for Blue Shield of California. “The truth is, the industry is complicated and it frustrates people.”
In its strategy, WellPoint increasingly is using focus groups composed of more than 9,000 consumers a year, as well as employers, health-care providers, insurance agents and others, to get feedback on how to build trust and improve care.
WellPoint said the information coming from members has led to changes, such as quick follow-up calls to members who have sought customer service to make sure their problems were resolved and ask whether the company was sensitive to their issues.
“We are working to become the most trusted choice and establish important public- private partnerships that will enable us to help transform health care,” Kappel said.
In January, WellPoint unveiled what it touted as its “Plan for Covering America’s Uninsured,” which called for the expansion of state health plans to cover more children and families, as well as other public-private partnerships.
In fact, insurers are looking to play a key part in the health- care reform plans being unveiled by states, including Indiana, in an effort to increase coverage and make care more affordable. WellPoint‘s Anthem has voiced support for Gov. Mitch Daniels’ proposal to raise the cigarette tax to help fund coverage for low-income residents.
WellPoint, though, has spoken out against a key feature of California Gov. Arnold Schwarzenegger‘s plan, which would require insurers to dedicate at least 85 percent of their premium revenues to patient care, rather than profit or administrative costs. In the most recent quarter, 81 percent of WellPoint‘s revenue went to patient care.
On the federal level, President Bush has proposed changing the way health insurance is taxed to help fund efforts to reduce the ranks of the uninsured. Bush’s plan would tax money spent on coverage, by employers or individuals, as income but would provide a deduction of $7,500 for individuals or $15,000 for families. Experts say the change would increase taxes for an estimated 30 million people.
Glasscock has urged the government to be “very cautious” in pursuing that plan because of its potential dramatic effect on health benefits.
Some industry observers said WellPoint and other insurers have their work cut out for them if they want to get the public on their side for the legal and political battles ahead. Carl McDonald, analyst with investment bank CIBC, said many people still identify health insurers with confusing paperwork or rejected claims.
“It’s a very difficult mindset to try to shift,” he said.
Profits and pay
Some critics say their mistrust of health benefits companies stems from the profits they reap and the compensation they provide their top executives. Here’s a look at the financial details of the nation’s top health insurers:
2006 revenue: $56.95 billion
2006 net income: $3.1 billion
Chief executive: Larry C. Glasscock
2005 salary: $1.2 million
2005 bonus: $3.4 million
2005 stock options/grants: 400,000 shares
UnitedHealth Group:
2006 revenue: $71.7 billion
2006 net income: $4.174 billion
Chief executive: Stephen J. Hemsley
2005 salary: $1 million
2005 bonus: $2.4 million
2005 stock options/grants: 600,000 shares
2006 revenue: $25.1 billion
2006 net income: $1.7 billion
Chief executive: Ronald A. Williams
2005 salary: $1 million
2005 bonus: $1.7 million
2005 stock options/grants: 744,412 shares
2006 revenue: $16.5 billion
2006 net income: $1.16 billion
Chief executive: H. Edward Hanway
2005 salary: $1.05 million
2005 bonus: $3 million
2005 stock options/grants: 136,430 shares
Humana:
2006 revenue: $21.42 billion
2006 net income: $487.42 million
Chief executive: Mike McCallister
2005 salary: $858,611
2005 bonus: $1.3 million
2005 stock options/grants: 250,000 shares
Sources: SEC filings; company reports.
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Contact the author Star reporter Daniel Lee at: (317) 444-6311 or [email protected]
