WellPoint Invests in Bloom Health - Analyst Blog
26 September 2011 - 9:00PM
Zacks
Last week, WellPoint Inc. (WLP) announced a
collaboration with Health Care Service Corp. (HCSC) and Blue Cross
Blue Shield of Michigan (BCBSM) to purchase a 78% stake in
Minneapolis-based Bloom Health.
All three
companies purchased equal stakes in the insurance exchange for an
undisclosed amount. However, BCBSM owned a small percentage
of Bloom Health’s shares before the deal.
Bloom Health is a private online health-insurance exchange which
offers a variety of health insurance plans to almost 20,000
employees. It is two years old and currently covers about 50
companies in 19 US states. WellPoint, along with HCSC and BCBSM,
aims to increase Bloom Health’s coverage to all 50 US states by the
end of 2012. They will offer enrollment on a limited basis till
2012 and become fully functional in 2013.
The strength of Bloom Health lies in providing flexible and
affordable health insurance plans. It allows employers to pay a
fixed amount for employees’ insurance coverage, thereby limiting
their insurance expenses. Additionally, it provides employees with
the flexibility of choosing their own insurance plans and paying
the extra premiums over and above the amount paid by the
employer.
Thus, employees can choose plans to suit their individual needs
and budgets, while employers are protected from rising health care
costs. Moreover, as Bloom health operates in many states, employers
do not have to meet the diverse requirements of individual
state-run exchanges in each of the states where they
operate.
Bloom Health will be in direct competition with the state-run
insurance
agencies that will be opened by the US administration in
2014. We believe that the investment will be profitable for
WellPoint, which is already the largest insurer on the basis of
enrollment, beating competitors like Aetna Inc.
(AET), CIGNA Corporation (CI) and
UnitedHealth Group Inc. (UNH).
WellPoint carries a Zacks #3 Rank, which translates into a
short-term Hold rating. On Friday, the shares of the company closed
at $64.05, up 0.7%, on the New York Stock Exchange.
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