WellCare worries over how health insurers look…

February 22, 2010

This morning’s NY Times had an interesting story about the Obama Administration going after what it describes as “excessive rate increases” that some health insurance companies — the article talks about Anthem Blue Cross specifically, a subsidiary of WellPoint (WLP) — are trying to pass along to their subscribers.

And just last week, a friend of mine who runs a small business, told me that her insurance company — United Healthcare (UNH) — planned to increase her rates by nearly 50% come March 1. So perhaps it’s not much of a surprise that WellCare (WCG) had this new warning — a risk factor — in the 10-K that it filed last week:

Negative publicity regarding the managed care industry may have a material adverse effect on our business, financial condition, results of operations and cash flows.

The managed care industry historically has been subject to negative publicity. This publicity may result in increased legislation, regulation and review of industry practices and, in some cases, litigation. For example, the Obama Administration and certain members of Congress have been questioning the profits of health insurance plans and the percentage of premiums paid that are going directly to health care benefits. These inquiries have resulted in news reports that are generally negative to the health insurance industry. These factors may have a material adverse effect on our ability to market our products and services, require us to change our products and services and increase regulatory or legal burdens under which we operate, further increasing the costs of doing business and materially adversely affecting our business, financial condition, results of operations and cash flows.

Now there’s probably very few places in the world where a company can get away with a 38% (or 50% in the case of my friend) price hike and not suffer some sort of negative publicity. So complaining about it — or listing it as a risk factor that could have a material adverse impact — seems particularly ironic, given that there’s an easy enough solution: don’t do it.

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