JP Morgan 27th Annual Healthcare Conference Angela F. Braly President & Chief Executive Officer January 12, 2009

Transcription

1 JP Morgan 27th Annual Healthcare Conference Angela F. Braly President & Chief Executive Officer January 12, 2009

2 Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995 The statements made during this presentation that are not historical facts are forward-looking statements within the meaning for the Federal securities laws, and may involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from expectations include, but are not limited to, the risks discussed in the Company s most recent filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2007, and its Quarterly Reports on Form 10-Q for the reporting periods of The Company plans to release earnings results for the three months ended December 31, 2008, on January 28, The Company is currently in a quiet period prior to this scheduled earnings release, and therefore this presentation does not include earnings projections. 2

3 Agenda WellPoint Profile Membership Growth Opportunities Positively Impacting the Cost and Quality of Health Care Operating More Efficiently Health Care Reform 3

4 WellPoint: A Health Benefits Leader YTD Through 9/30/08: Medical Membership 35.3 million Operating Revenue $46.2 billion After-Tax Margin 4.7% Diluted EPS $4.09 Operating Cash Flow $2.0 billion 4

5 Diverse Membership Base Geographic Diversity of Membership Broad Customer Base State Sponsored 6% Senior 4% FEP 4% Individual 7% Local Group 47% National Accounts 19% BlueCard 13% BC or BCBS licensed plans UniCare > 100K members UniCare < 100K members Self-Funded 53% Fully Insured 47% Growing Specialty and Comp. Health Solutions businesses Largest Medicare Parts A & B claims-processor in the nation Note: Data as of 9/30/08. 5

6 Brand Name Leader 50% 40% 30% 41% When you think of health insurers, which one health insurance company comes to mind first? 1in3 A M E R I C A N S carry a Blue Cross and Blue Shield ID card 20% 13% 10% 9% 4% 3% 0% BCBS in WLP's 14 states UnitedHealth Group Aetna Kaiser CIGNA Source: 2007 WellPoint Consumer Image Studies conducted in WLP s 14 Blue States. 6

7 Strong Local Presence WLP Market Shares of Insured Population 50% 40% 30% 20% 10% 0% CT NH IN VA ME KY MO GA OH CA NY CO WI NV Local Market Advantages Provider network advantage Cost advantages Medical management initiatives Vast data set Community involvement Source: Company estimates as of 9/30/08. 7

8 Extensive & Cost-Effective Provider Networks The Blue Cross Blue Shield National Provider Network includes more physicians and hospitals than any other network in the industry BCBS National Provider Network*: 260,000 PCPs and 467,000 Specialists, approximately 80% of nation s total 6,300 hospitals, approximately 95% of nation s total Deep network discounts * Sources: Blue Cross Blue Shield Association, Company estimates,

9 Insurance Subsidiaries Are Well-Capitalized WellPoint, Inc. has a preliminary estimate of its fourth quarter 2008 net realized investment losses and 12/31/08 statutory capital position Net realized investment losses, after-taxes, are expected to total approximately $349 million in 4Q08:* $212 million Equity Securities $137 million Fixed Maturity Securities $349 million Total Investment Portfolio At 12/31/08: statutory capital levels expected to exceed BCBSA requirements by approximately $1.6 billion and state regulatory levels by approximately $4.6 billion Approximately $2 billion of dividends were paid from the regulated subsidiaries to the parent company in 4Q08 * Based on expectations as of January 12,

10 Agenda WellPoint Profile Membership Growth Opportunities Positively Impacting the Cost and Quality of Health Care Operating More Efficiently Health Care Reform 10

11 Medical Enrollment Growth We added 528,000 new medical members during the first nine months of 2008 (organic growth of 1.5%) 40 Membership Growth Through 9/30/08 Medical Members (in millions) National Senior Local Group / FEP Individual State Sponsored 641,000 58,000 30,000 (49,000) (152,000) 20 Total 528,000 12/31/05 12/31/06 12/31/07 9/30/08 11

12 National Accounts: Consistent Performance With Significant Upside 44% of Fortune 1000 companies are headquartered in our service areas 31% penetration in our 14 states with continued upside potential Membership * (in millions) Expect to continue being a net taker due to our strong value proposition /31/05 12/31/06 12/31/07 9/30/08 Control Accounts BlueCard Membership 2009 Outlook*: 45 new account wins 17 accounts with significant ingroup growth Membership (in millions) Expect 400,000+ net new National members 0 9/30/08 Potential Market** * Estimated based on projections as of December 2008; ** Potential market represents prospects in WellPoint s 14 Blue States (based on company estimates) 12

13 New Product Introductions For Individuals and Small Employers 13

14 Innovation-Driven Growth Demonstrated ability to deliver new, innovative products that drive membership growth CDHP Membership has grown by 405,000, or 30%, since 12/31/07 CDHP membership composition is weighted towards fully insured 2,000,000 Period-End Membership 1,600,000 1,200, , ,000 ASO, 41% Fully Insured, 59% 0 12/31/05 12/31/06 12/31/07 09/30/08 CDHP Membership 09/30/08 Lumenos Key Competitive Advantages Incentives Integration Information 14

15 Senior Market Expansion WellPoint will continue to focus on this large and growing market Membership at 9/30/08 Senior Market: Medicare Supplement Medicare Advantage Total Senior Membership Medicare Part D 836, ,000 1,308,000 1,870, million seniors age 65+ Additional 50 million people in age band Collectively, this group spends $600 billion on health care 15

16 State Sponsored Business WellPoint Had 2.0 Million State Sponsored Members at 9/30/08 Medicaid ABD & LTC Populations: Significant Growth Opportunities Total Medicaid Enrollees (52M)* Total Estimated Medicaid Spending ($252B)* 6% 19% 33% 75% 36% 31% WellPoint State Sponsored Operations Total Medicaid Estimated Medicaid Spending TANF ABD LTC * Sources: Centers for Medicare & Medicaid Services, 2004; Kaiser Commission on Medicaid and the Uninsured, 2004; U.S. Department of Health and Human Services, April

17 Integrating Specialty Products Behavioral Health: 23.6 million members 2 nd largest health plan-owned behavioral health company* Life: 5.5 million members 14 th largest in the nation* Dental: 4.6 million members 7 th largest in the nation* Vision: 2.6 million members Added more than 2 million members in less than 6 years MEDICAL DISABILITY VISION BEHAVIORAL HEALTH DENTAL LIFE WellPoint intends to increase the penetration of its Specialty Products in the future * Company estimates based on membership as of 9/30/08. 17

18 Agenda WellPoint Profile Membership Growth Opportunities Positively Impacting the Cost & Quality of Health Care Operating More Efficiently Health Care Reform 18

19 Comprehensive Health Solutions To Address Health Care Cost and Quality The business units of Comprehensive Health Solutions have evolved to create a total health solution Past Present Separate business segments within CHS CHS functions integrated & optimize member care while controlling trends Outcomes Meet or exceed Medical cost trend Member Health Index State Health Index Improve Member & provider satisfaction Employee absenteeism & productivity Outcomes from care management initiatives Program engagement rates Auto-adjudication of claims Health Care Management 19

20 Cardiac Centers of Excellence: Higher Quality & Lower Cost Blue Distinction Centers (BDC) for Cardiac Care SM have shown lower readmission rates and lower allowable costs for cardiac bypass surgery and outpatient angioplasty Readmission Rates Allowable Costs $45,215 $47, % 16.7% 10.6% 15.5% $18,993 $21,535 n = 1,629 n = 808 n = 1,797 n = 2,362 Coronary Artery Bypass Graft Outpatient Angioplasty (PCI) Coronary Artery Bypass Graft Outpatient Angioplasty (PCI) BDC Other Statistically significant difference BDC Other Statistically significant difference Note: Results shown are mean values for cumulative 0-90 day readmission rate Note: All allowable costs for initial admission through 90 days including total claims from inpatient and outpatient services represented as median risk adjusted cost. Source: HealthCore, Inc. Cardiac Multi-Plan Claims Analysis, November

21 Anthem CareCompare: Usable Cost & Quality Information Industry leading online tool for performing side-by-side comparisons for 39 common medical procedures and services based on facility performance Displays total costs for episode of care using actual contracted rates Also displays selected quality factors Now available in 10 WLP states with further expansion planned, including to 4 non-wlp Blues plans 21

22 American Imaging Management: Expanding Processes to Other Specialties Current State 2009 Order Entry Order Fulfillment Platform Expansion + Ordering physician determines need for diagnostic imaging The Right Test at the Right Time Diagnostic imaging procedure performed by provider The Best Location for the Service Application of AIM s platform to other clinical services Cardiology Specialty Pharmacy Oncology (future) WellPoint and 12 other Blues plans currently use AIM services 22

23 Collaborating With Physicians Via Health Information Technology E-Prescribing Pilot Results Ohio 100 physicians deployed with desktop E-Rx resulted in ~2% generic utilization gain vs. network New Hampshire Free Smartphone, free software and Anthem telecom discounts extended to individual physicians with P4P rewards for adoption and use Individual Health Record Results of Kettering Medical Center Pilot 10,000 members and 200 physicians 7.4% decrease in overall medical costs 10.3% reduction in total cost per employee for inpatient services Reducing medical errors and unnecessary services, and positively impacting health care costs through point-of-care health information 23

24 Resolution Health: Data Analytics & Member Messaging Process Data inputs from WLP and other sources sent to RHI Sample Output Output from RHI can be in either paper or electronic format, as well as an information feed back into medical/disease management information systems Integration and standardization of data Evidence-based rules engine applied to member data Identification of actionable opportunities Alerts/messages sent to members and providers 24

25 Measuring Our Performance Through Member Health & State Health Indices Member Health Index WellPoint State of Health Care Rankings* WLP performance is assessed in four areas: 1) Screening/Prevention 2) Clinical Outcomes 3) Care Management 4) Patient safety 5% of annual incentive compensation is linked to the Member Health Index and Member Trust measures Wellpoint State of Health Care Rankings 1 t o to to to to 51 1 is B est, 51 is Wo rst * Based on WellPoint State Health Index 25

26 Agenda WellPoint Profile Membership Growth Opportunities Positively Impacting the Cost and Quality of Health Care Operating More Efficiently Health Care Reform 26

27 Information Technology Strategy Has Been Refreshed Strategy migrates business based on segment needs and creates common enterprise capabilities, moving to 3 core claims systems over time Group State Sponsored Individual Medicare Supplement Medicare Adv. & Part D National Member Claims Product WGS Enterprise Member Data Hub For All Platforms WGS Enterprise Product Database FACETS FACETS Common Enterprise Clinical Editing For All Platforms NASCO NASCO NASCO Provider Enterprise Provider Solution For All Platforms 2009 Priorities: Enhancement and readiness of target platforms (WGS, NASCO and Facets) for future migrations Build-out and deployment of the enterprise business capabilities Retiring two claims platforms one supporting State Sponsored Business and a small TPA system Migrating CDHP business for National Accounts from a legacy platform to NASCO 27

28 SG&A Expense Ratio Reduction We have significantly reduced our administrative expense ratio while making investments to grow our business into the future SG&A Expense / Total Operating Revenue 25% 20% 15% 10% 5% 0% 21.4% 19.7%19.4% 18.8% 17.0%16.5% 15.7% 14.5% 14.5% 690 basis point reduction YTD 3Q08 Strategic Initiatives: New product rollouts IT platform migrations Process standardization Anthem CareCompare 360 Health offering Behavioral health in-sourcing 28

29 Agenda WellPoint Profile Membership Growth Opportunities Positively Impacting the Cost and Quality of Health Care Operating More Efficiently Health Care Reform 29

30 Reform Needs to Address Drivers of Health Care Cost Trends The net cost of private health insurance comprises 4% of the total cost of health care in the United States * The Nation's Health Dollar, Calendar Year 2007: Where It Went* Represents the net cost of private health insurance (administrative costs and profits) Other Spending, 25% Other Gov't Administration, 3% Private Health Insurance, 4% Prescription Drugs, 10% Nursing Home Care, 6% Hospital Care, 31% Physician & Clinical Services, 21% * Source: Centers of Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, January Other Spending includes dentist services, other professional services, home health, durable medical products, OTC medicines and sundries, public health, other personal care, research and structures and equipment. 30

31 Uninsured Americans: A Growth Opportunity ~ 46 Million Uninsured Americans Outreach Efforts: Need Assistance: Expansion of state health care programs Tax credits Premium assistance programs Low income but not eligible for current programs (55%) Already eligible for public programs (25%) Income above 300% of FPL (20%) Community Resource Centers Enrollment vans Innovative & Flexible Products: Prism Lumenos CDHP SmartSense High risk pools Premier Blue Essential WellPoint enrolled an estimated 272,000 individuals who previously had no health insurance during the first nine months of 2008 Sources: Company estimates; Dubay, Holahan, Cook, The Uninsured And The Affordability Of Health Insurance Coverage, Health Affairs, 11/2006; U.S. Census Bureau, 8/

32 WLP: An Optimistic Future Industry With Long-Term Growth Opportunities Differentiated Value Proposition in the Marketplace Positively Impacting the Cost and Quality of Health Care Reducing Our Own Administrative Cost Structure Advocating a Choice-Based, Private Health Care Market 32