Making Health Insurance Hip

WellPoint see growth selling no-frills coverage to twentysomethings

Angela F. Braly, the plainspoken 45-year-old Texan just named to lead the nation's biggest health insurer, loves the Web sites her company uses to reach out to uninsured twentysomethings. WellPoint Inc. (WLP ) targets these so-called young invincibles—generally healthy folks who shun coverage as too costly and unneeded—with images of wild-haired guys and girls sticking out their tongues, sketches of skateboarders, and language like, "You live life on the edge and happily go over it."

The big Blue Cross Blue Shield plan marketer is winning hundreds of thousands of new customers with policies named "Part-Time Daredevil" and "Gravity Bender," offering basic coverage for as little as $67 a month. The hip sites, says Braly, are helping WellPoint make "significant progress" in bringing health coverage to those who lack it. "Those are cool, don't you think?" Braly crows.

But no matter how clever or colorful, the Indianapolis giant's efforts to shrink the ranks of the uninsured aren't winning universal acclaim. The slimmed-down policies, which omit maternity benefits, for instance, are "obscene," charges one critic. With them, the company is underinsuring and overcharging customers, fumes another. Others say Braly's outfit may wind up covering only healthy people, leaving others to government programs. "From a public-policy perspective, it doesn't work," claims Dr. Don R. McCanne, a senior health policy fellow with Physicians for a National Health Program, which advocates a Medicare-like single-payer system.

Braly, named on Feb. 26 to take over on June 1 for departing WellPoint Chief Executive Larry C. Glasscock, begs to differ. She's an articulate lawyer, currently the company's general counsel running public and government affairs. She argues that filling the health-care coverage gap will take "new and innovative" approaches that meet the public's needs and pocketbooks. Not everyone needs maternity coverage, for instance, and shouldn't be asked to pay for it, she says. And different groups have different "triggers" for seeking insurance, she adds, noting that Hispanics—another big market WellPoint is targeting with small-group policies—tend to avoid coverage until they have children. "Consumers are telling us what they want," Braly says, arguing that WellPoint is growing because it listens.

Indeed, consumers are snapping up the novel policies that WellPoint markets, so far mainly in eight states. Sold on sites like and, they're a hit with those aged 19 to 29, and a big part of the way WellPoint has sold coverage to some 780,000 previously uninsured people in the last two years, says Braly. While that's just a fraction of the nation's 46 million uninsured—and of the 34.1 million that WellPoint covers, most in Blue plans in 14 states—the effort has been "incredibly successful," the CEO-designate says.

As the debate on health care rages nationally, WellPoint has thrived, hitting No. 2 on the 2006 BusinessWeek 50 list of the best corporate performers. Even if it doesn't buy more Blue Cross Blue Shield operations, which is how the once-sleepy $6 billion-a-year Midwestern company grew into a titan in the past eight years, analysts expect its net income to grow by more than 10%, to about $3.4 billion, as sales move above $60 billion this year. And Braly says WellPoint will be acquisitive.

But it's also a big target, and will become more of one as Braly presses for a bigger role in the national health-care debate. The scaled-back individual policies WellPoint offers under the Tonik and Sound brands may cost as little as one-third of what employer-based group coverage does, but they cover as few as four doctor visits annually (with co-pays) and carry deductibles ranging as high as $5,000 (or $10,000 for services outside a network).

"What if you have cancer?" asks Deborah J. Chollet, a senior fellow at the Mathematica Policy Research Inc. think tank in Washington. "You face incredibly expensive radiation treatments and chemotherapy, and it's guaranteed you're going to see a doctor once a week." All services would be covered up to $5 million, the company says, after the patient pays the deductible.

The skimpy coverage may ultimately burden others. Such individual policies take young, healthy people out of groups—"risk pools" in insurance-speak—that help pay for families' and everyone else's coverage. Finely tailoring policies "segments the risk pool and leaves older and sicker people in the pool with higher insurance costs," frets Kathleen D. Stoll, director of health policy for Families usa, a Washington nonprofit that is an advocate for health care.

Still, to some health system players WellPoint's approach makes sense. Is it smarter to keep an unmarried 22-year-old guy uninsured because he shuns pricey benefits that only families need? WellPoint's tailored plan "is cheaper than a lot of products, so of course it's not going to cover as much," says John W. Oxendine, the state insurance commissioner in Georgia and a fan of Tonik. "The key is disclosure, so consumers understand what is covered."

As they age, customers will need fuller coverage. Braly, who earned her spurs running the Missouri Blue Cross Blue Shield plan that WellPoint acquired, says the "Part-Time Daredevils" will move up as they settle down. "If you can really bring more people into the health-insurance market, that's a positive thing," says Paul B. Ginsburg, president of the Center for Studying Health System Change, a policy-study outfit. He admits to mixed feelings about the WellPoint approach.

The challenge for WellPoint will be whether it can provide affordable full coverage for the no-longer-invincibles.

By Joseph Weber

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