WellPoint Rate Hike Brings Calif. Probe
NEW YORK (TheStreet) -- Wellpoint (WLP), one of the most profitable health insurers, has increased its rates and the California state insurance commissioner has launched an investigation.
Citing state law requiring at least 70 cents of every dollar in premiums to be spent on medical care, California Insurance Commissioner Steve Poizner said he was "alarmed by the Anthem Blue Cross health insurance rate hikes." He added, "I have instructed my department to hire an outside actuary to examine their rates line by line," saying he would bring the rates down if they are found to be excessive.
Profit margins for health insurers aren't typically large. The average insurer spent 88% of its premiums, in the nine months to September, on medical expenses. This is before administration expenses tied to this care that averaged 10.5%. The average insurer, therefore, had a 1.56% profit margin through September, before investment income was factored in.
Wellpoint, though, isn't typical. Through September, for all of its insurance companies, it managed to keep medical expenses down to 83.3% of premiums and administration down to 9.3%. This gave it a 6.3% profit margin. Anthem Health Plans of Virginia reported a 15.1% margin on health care but even this wouldn't exceed the 30% California maximum.
Other groups, such as Aetna (AET), have thinner margins. Aetna reported an overall health profit margin of 1.3%. This was below average but mainly because its administrative expenses were higher than most. Centene (CNC) reported a health loss of 0.7%. Again, like Aetna, medical expenses were controlled, but expenses, of more than 15% of premiums, weren't.Select the service that is right for you!
COMPARE ALL SERVICESAction Alerts PLUS
TRY IT FREEJim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
Product Features:
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Dividend Stock Advisor
TRY IT FREENew! $49.95/yr
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Product Features:
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Stocks Under $10
TRY IT FREEDavid Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
Product Features:
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
- Weekly roundups
Real Money
TRY IT FREE24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
Product Features:
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
Real Money Pro
TRY IT FREEAll of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
Product Features:
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Options Profits
TRY IT FREEOur options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
Product Features:
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV