Last year Rob Stone got over 30 million votes for his shareholder resolution to make Wellpoint a non-profit. This year, he went back to the shareholders meeting once again — jh
Tuesday, May 17, 2011. The traffic in downtown Indianapolis was moving slower than an insurance company clerk preparing a reimbursement check, backed up for blocks, and if we were one second late the doors to the WellPoint annual shareholders meeting would be sealed, protected by armed guards. We jumped out of the car, leaving it our friend Donna Smith to find a parking spot, and started running up the street, dodging traffic, past the phalanx of police cars and into the Hilton.
Breathlessly rushing through the lobby we asked which floor for the WellPoint meeting, and luckily didn’t wait long for an elevator. When we reached the 9th floor with minutes to spare, the WellPoint staff at the registration desk greeted us like old friends, “Dr. Stone, we were afraid you weren’t going to make it.”
My wife and I bought 5 shares of WellPoint (or Anthem, or Blue Cross) in 2005 and have been coming to these annual meetings since. We’re all getting to know each other. Many of the WellPoint employees seem to genuinely like us. But not all.
WellPoint holds its annual brouhaha in a drab meeting room high up in the Hilton. Security is easier there than at their corporate headquarters a block away. WellPoint employees outnumber the stockholders, but most of the chairs are empty. The Board and the brass fill the first three rows. This year there were more stern faces with ear buds standing around than ever, including, as we later learned, plainclothes officers from the Indianapolis Police Department.
The Robotic Barbie Doll
At the dais, Angela Braly, CEO and Chair of the Board, ruled over the meeting like a robotic Barbie doll, smiling as she nodded and looked around the room, mouth moving but nothing meaningful emerging. Wendell Potter, author of Deadly Spin, calls it “being obscure clearly.” She’s been well coached.
This 2011 meeting was as tightly scripted as a professional wrestling match. The outcome was never in doubt. Years past it was more informal, with a reception afterward where common stockholders could actually mix with the elite. Now the Directors come and go through a separate door. This time they didn’t even introduce the Board, which includes luminaries like Susan Bayh, wife of former Indiana Senator Evan Bayh, Don Riegle, former Senator from Michigan, and William “Bucky” Bush, brother of the first President Bush and uncle of GW.
WellPoint finds itself trapped within its internal contradictions, afraid of its own stockholders who speak truth to power and dare to say the Empress wears no clothes. This year’s meeting felt like a siege, like those in control were clenching their teeth and couldn’t wait to for it to be over.
Those brave ones who dared to ask a question were faced with a massive flat screen hanging in the front, counting down 120 seconds like a shot clock. Once the two minutes was up, the mike was turned off. Ms Braly, on the other hand, was free to wax on in her clear obscurity, unlimited by time. Another first this year – WellPoint planted shills in the audience to ask softball questions.
John Lennon sang, “One thing you can’t hide is when you’re crippled inside.”
WellPoint is the for-profit monstrosity created from the mergers and acquisitions of 14 formerly nonprofit state Blue Cross and Blue Shield plans. The crown jewels are the former Blues in California and New York, but as history would have it, the national HQ is just up the road from me in Indianapolis.
In 1937, in the early days of American health insurance, Blue Cross plans were required to be nonprofit and have a mission that was “charitable and benevolent.” In the late 1980’s Indiana’s Anthem Inc. began a series of transformations culminating in 2001 with “demutualization,” followed by an initial public stock offering. Anthem subsequently merged with WellPoint, the former Blue Cross of California in 2004. WellPoint covers more lives than any other health insurance corporation in the world.
Lying With a Straight Face
Although WellPoint/Anthem loves the Blue Cross brand and uses it in advertising today, in this year’s proxy statement they lied with a straight face. Our group, Hoosiers for a Commonsense Health Plan, sponsored a shareholder resolution calling on WellPoint to fund a feasibility study for returning to its nonprofit roots. In their statement advising a shareholder vote against our resolution they said, “The proposal states that we were formerly a nonprofit entity. That is not correct,” followed by legalistic gobbledygook which attempts to obscure their Blue Cross ancestry.
Contradictions abounded during this meeting. Lip service only was given to the needs of patients (“customers” in their lingo), but the main course served was for their Wall Street masters. WellPoint is making record profits and sitting on record piles of cash. What are they doing with it? Like so many other Fortune 500 companies these days, they are buying up smaller companies, not insurance companies this time, but health-related companies involved in things like medical information technology and expanding their presence in China.
In 2011, for the first time in their history they paid a dividend, which Ms. Braly explained would make the stock more attractive to investors.
While they claim to be investing in “infrastructure, new products and programs that improve the quality of service to customers and members,” data suggest otherwise. Since 2008 the company has spent $66.9 million on federal lobbying as well as millions on campaign donations. Over the past 10 years WellPoint’s total compensation to its CEO’s has totaled over $164 million.
If they are spending on infrastructure, why did they announce in June 2010 that a security breach may have exposed the social security numbers and medical records of 470,000 people? The same month the Indiana State Medical Society reported that WellPoint has the worst claims accuracy rating among the largest health insurers.
Most outrageous of all, from 2003 through 2010, WellPoint spent $21.6 billion (that’s billion with a “B”) of patients’ premium dollars to buy back its own stock.
Spending billions on stock buybacks benefits a tiny elite of CEOs and top officers who are compensated with stock options which increase in value as the share price is manipulated upward. This is an enormous transfer of wealth from hard-pressed employers and patients to CEOs and Wall Street. Not only do the stock buybacks allow executives to line their own pockets, the process strips companies of resources that could otherwise be used reduce premiums, improve benefits, create jobs and bring innovation to the business of health insurance.
The only thing Ms. Braly made clear and unobscure during her comments was that this is a company committed to growth, growth in profits, growth in stock price, and there was nary a mention about the uninsured, the underinsured, medical bankruptcy, denial of care and coverage, or WellPoint’s signature profit-making ploy: rescission, policy cancellation after an insured patient becomes ill.
A Stunning Vote of No Confidence
At the 2010 shareholder meeting our shareholder resolution caught WellPoint with their pants down. In this year’s proxy statement they claimed “an overwhelming majority of our shareholders voted against this proposal last year.” That’s one way to look at it. Thirty million shares, 9.6% of the shares voted, were in support of our return to nonprofit. A more accurate description might be “a stunning vote of no confidence in the company leadership.”
This year there were three shareholder resolutions, all opposed by the Board. At the close of the meeting they announced all three had been defeated, but the official vote tallies weren’t released until three days later. This time our resolution polled “only” 1.2 million votes. By the rules governing shareholder resolutions set by the Securities and Exchange Commission, we would have needed 17 million shares voted in our favor in order to bring our resolution back for a third round at the 2012 meeting.
What happened this year? There is healthcare “issue fatigue.” The Tea Party is on the rampage. The unions have been diverted, fighting for their lives. This spring I wasn’t able to generate nearly as much interest in supporting the resolution.
After the meeting I was no longer in a rush as I passed through the Hilton’s lobby. I saw a local reporter speaking to a well-groomed man wearing a WellPoint ID badge. The WellPoint fellow was telling the reporter that he was confident our resolution would not meet the SEC threshold this year. When he realized I was listening, he was only flustered for a second before regaining his composure. I introduced myself (although he clearly recognized me), and he adroitly avoided revealing anything about his duties at WellPoint. After he left, the reporter answered my questions. His name was David Palombi, Senior Vice President for Corporate Communications, the top PR guy in the company.
The subtitle of Wendell Potter’s book Deadly Spin is An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans. Mr. Potter was the VP for Corporate Communications at the giant insurance company CIGNA until he saw the error in his ways and came over to our side. For anyone who has read Deadly Spin, it’s not hard to imagine that one of Mr. Palombi’s tasks this spring was to make certain that the shareholders who voted in our favor in 2010 were “educated” to follow the Board’s urging this time around.
David versus Goliath
Our resolution was crushed, but we not need shed any tears. WellPoint was never going to return to nonprofit. We were a David-sized fly to their Goliath. But we’re not done yet.
The lesson to be learned from the last few years is that the health insurance industry cannot be reformed. Not from the inside by shareholder resolutions or from the outside by the Affordable Care Act. They are just too powerful. They have amassed too much money and own too many politicians.
They will not be reformed. They can only be counted on to protect their profits over their patients. They must be replaced by a simple single payer plan like an expanded Medicare For All, guaranteeing health care, not just “coverage,” starting at birth.
These behemoth health insurers may be powerful and appear invincible, but they are deeply unpopular with patients, physicians and hospitals. They are corrupt and parasitic middlemen who add no value to our healthcare system, only layers of cost, aggravation and bureaucracy, covered over with a shiny gloss of PR.
David sometimes wins. Think colonists against the British. Cesar Chavez against the grape plantation owners. Si, se puede. Ask the good people at Tahrir Square. Ask Hosni Mubarak.
Wall Street is for Wealth Care, not Health Care. All around the country, people are figuring that out. Vermont’s governor has signed a bill to move that one small state toward guaranteed health care for all, without insurance companies.
Imagine a world without health insurance corporations sucking out huge profits. It’s easy if you try.
It will take pressure from every point, from the grassroots right up to Congress. There is a new pressure point growing, divestment. Begin by checking your savings investments and retirement funds. Then examine the portfolios of your church and alma mater. Divest from these immoral companies. Be like David and let it fly.