Stellaris Health, Empire BCBS Trade Barbs as Contract Expires

John Commins, for HealthLeaders Media , April 2, 2010

Nizza said hospitals and physicians are struggling while Empire's parent WellPoint reported record revenues and profits in 2009, with total revenues of $61 billion with net income of $4.7 billion, nearly double its 2008 results.

"This is the same WellPoint that was recently criticized by a Congressional committee for raising rates by as much as 39% for individual insurance plans in California. The Congressional committee also rebuked WellPoint for raising rates for subscribers while spending millions on lavish corporate retreats," Nizza said.

However, Empire said the insurer and WellPoint are operating on a 4% margin, and that Stellaris is profitable too. "Nonprofit is a tax designation only—it doesn't mean for a second that Stellaris isn't profitable," Empire said, in a follow-up media release addressing Nizza's complaints. "When hospitals attempt to deflect from the issue by pointing to our profits, they ignore one key fact—most of our business is self-funded. That means that the customer directly pays the claims expense. There is no mark-up or margin. If the claims is $50, the customer pays $50; if it's $25,000, the customer pays $25,000, so increases impact our customers dollar for dollar."

Empire said that more than 70% of its commercial business at Stellaris hospitals come from customers in self-funded arrangements. "Frankly, our customers who pay these costs deserve a better explanation for a 15% increase—when the system is already earning a 20% margin on Empire's business," Empire said. "The truth is that systems, such as Stellaris, have market power that enables them to effectively cost shift to private payers and, therefore, they haven't had to focus on cost structure."

Nevertheless, Nizza said Empire and WellPoint have "not yet gotten the message" sent through health reform.

"The era of health insurance companies running roughshod over hospitals and patients in their unbridled quest to reap huge profits for their investors is over," Nizza said. "For the health of our nation and our communities, the time has come for the insurance conglomerates to join with the hospitals and healthcare community to invest in our healthcare system and not just bleed the system to gain record profits for their investors."

John Commins is a senior editor with HealthLeaders Media.

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