In this health reform debate, people have been talking about the term “medical loss ratio,” which is the term for how much money is spent on patient care, rather than administration, marketing, and profit. It’s clearly a Wall Street term: How much money is “lost” to patient care? It shows the inverted priorities of an unrestrained industry.
It suggests that whatever insurance companies (or other companies) say to regulators, it is also important to see what they say to investors.
So I thank Don McCanne, of California Physicians Alliance and the Physicians for a National Health Plan for pointing the following comments by Wellpoint executives, the owners of Blue Cross of California.
He has for years sent out an invaluable “Quote of the Day” on health policy, along with his own commentary and analysis, all in his admirable and unyielding quest for universal, single-payer health care. And here’s just another nugget, which really doesn’t need comment:
Bank of America Health Care Conference
June 1, 2007
Angela Braly, President and CEO, WellPoint, Inc.:
Let me conclude with a few investment considerations for you to take away from this presentation. Health-care costs continue to rise at a faster pace than overall inflation and are now projected to comprise approximately 20% of the gross domestic product by 2016. We believe that our strategic plan positions us very well to address this continued rise in health-care expenditures as we bring a superior value proposition to the marketplace and a strong voice in the community that helps in advocating a choice-based private health-care market.
The health insurance sector is continuing an era of consolidation. Back in 1995, the ten largest companies enrolled just 27% of the market, whereas today, the ten largest plans have about 52% of the market. Considering the investments required to effectively compete in new areas like consumer-directed health-care and comply with ever-changing regulations, many smaller plans are deciding to leave the industry or partner with larger plans to improve their competitive position.
WellPoint has a consistent track record of delivering on our financial promises to Wall Street and we expect this to continue. With our projected earnings of $5.54 per share for 2007, our compound annual EPS (earnings per share) growth rate will be 22% over a six-year period.
So in summary, we believe that WellPoint is a compelling investment opportunity with strong growth prospects, and I hope that you agree.
Wayne DeVeydt, EVP and CFO, WellPoint, Inc.:
I think one of the questions that I will get from many of you over the near term will be my philosophy, and I want to make sure everybody in this room understands and on the webcast that I’m fully committed to the 15% earnings per share growth and believe that that is sustainable for not only the near term, but the longer term.
We think it’s a compelling opportunity as well for investment and we appreciate very much you coming out, especially on such short notice. Congratulations on your promotion, both of you.