Tuesday, March 4, 2003

Anthem bucks trend, grows as others shrink

Investors favor health insurer

By Mark Jewell
The Associated Press

INDIANAPOLIS - Homegrown Indiana health insurer Anthem Inc. has gone national, building an empire from Nevada to Maine out of Blue Cross Blue Shield plans that have shed their nonprofit status.

It has won popularity on Wall Street, and a place in the Standard & Poors 500 Index, in the process.

Yet not everyone is happy with Anthem, which raised cash for acquisitions when it converted in 2001 from policyholder ownership to a publicly traded company. The Indianapolis-based company is drawing greater scrutiny from regulators, hospitals and doctors.

An acquisition in Kansas is held up by a regulatory challenge, and Anthem's billing practices are under investigation in Indiana. And some doctors and hospitals have clashed with Anthem over claims payments and contract terms.

  A look at the history of Anthem Inc.:
• 1944-46: The company now known as Anthem emerges from a Blue Cross and a Blue Shield plan in Indiana.
• 1993: Anthem merges with the Blue Cross Blue Shield plan in Kentucky in the first cross-state merger of two strong Blue plans.
• 1995: Anthem merges with Community Mutual, a Blue in Ohio.
• 1997: Anthem merges with the Blue plan in Connecticut. The new unit also serves non-Blue customers in the New York City area.
• 1999: Anthem acquires the Blue plan in New Hampshire and its subsidiary. In exchange, regulators require Anthem to set aside $80 million to establish a charitable foundation. Anthem also acquires Blue plans in Colorado and Nevada, setting aside $155 million for charity.
• 2000: Anthem acquires the Blue plan in Maine, setting aside $81 million for charity.
• 2001: Anthem converts to investor-owned, for-profit status.
• July 2002: Anthem acquires Trigon Healthcare Inc. of Virginia.
  Source: Anthem Inc.
Anthem largest Indiana company
But investors have embraced Anthem, which has grown into the nation's fifth-largest publicly traded health benefits company. Anthem, which bills itself as the industry leader in eight of the nine states where it operates, has 11.1 million members, up from 7.9 million a year ago.

The growth has come amid consolidation in an industry under competitive pressure to spread claims risks across a bigger pool of policyholders. Bigger insurers also can negotiate better deals from doctors and hospitals, and merged companies can integrate one another's most effective risk- and cost-cutting strategies.

Anthem is competing with Thousand Oaks, Calif.-based WellPoint Health Networks to acquire independent Blues plans.

"WellPoint got out first, but I think Anthem has more than made up that ground by now," said Duane Sobecki, an Indianapolis-based health care analyst for the consulting company Focused Results.

Anthem and WellPoint have grown at the same time some bigger insurers without roots in the Blue Cross Blue Shield network, such as Hartford, Conn.-based Aetna and Philadelphia-based Cigna, have ordered layoffs and seen membership decrease.

Anthem was founded in 1944 as Indiana's segment of the Blue Cross network, created in the Depression to serve as an insurer of last resort. Now, about 85 million people, nearly 30 percent of the U.S. population, are covered by Blues plans.

Anthem has added eight Blues plans over the last 10 years through mergers and acquisitions, starting with Kentucky and then expanding into Ohio and other states.

Despite a recession, Anthem reported 60 percent earnings growth in 2002.

The 19,000-employee company's success has extended to the New York Stock Exchange, where it made the nation's 23rd-largest initial public offering on Oct. 30, 2001, with shares priced at $36 apiece. The stock rose to a high of $75 last June, but has since cooled off to the $50 to $60 range.

Its biggest acquisition was last year's $4 billion purchase of Richmond, Va.-based Trigon Healthcare Inc., formerly a nonprofit Blue plan.

"Certainly, as a publicly traded company, we're under more scrutiny than ever," said Larry C. Glasscock, Anthem's president and chief executive officer. "But, frankly, we wouldn't have been able to do a Trigon acquisition without being a public company."

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