WellPoint Increases Lobbying Cost - Analyst Blog
August 19 2011 - 11:25AM
Zacks
WellPoint Inc. (WLP) spent $1.3 million on
lobbying in the second quarter of 2011, up 17% from the year-ago
quarter, but a 3% decline from the first quarter of the year. Most
of the lobbying was centered on the health-care overhaul bill
announced by the U.S. Government, which has been a cause for
anxiety among health insurance companies.
WellPoint lobbied the Congress, the White House, the Centers for
Medicare and Medicaid Services, the Department of Labor and the
Department of Health and Human Services.
The company lobbied on the Pharmacy Competition and Consumer
Choice Act of 2011. It also lobbied on the minimum medical-loss
ratio requirement, rate reviews and taxes imposed on the health
insurance companies.
Meanwhile, WellPoint’s rival, Aetna Inc. (AET)
spent $902,453 on lobbying in the second quarter of 2011, down 42%
from the amount spent in the prior-year quarter and down 17% from
the first quarter of the year.
Similar to WellPoint, Aetna also lobbied against the minimum
medical-loss ratio imposed by the bill, which requires health
insurance companies to spend a fixed portion of their premium
collections on care and quality improvements. In case a company
fails to do so, it will be obliged to refund the amount to its
customers.
This apart, Aetna lobbied for a legislation to withdraw the
bill’s directive requiring the insurance of all Americans and for
bills to exclude brokers’ compensation from the calculation of the
above mentioned premiums, allow the Department of Health and Human
Services to directly negotiate drug prices and allow the
establishment of a Medicare Part D prescription drug program and an
insurance marketplace on a national scale.
CIGNA Corporation (CI), another health
insurance rival of both WellPoint and Aetna, spent $380,000 on
lobbying in the second quarter of the year, showing a 32% decline
from the year-ago quarter but a 36% increase from lobbing expenses
in the first quarter of 2011.
The increased lobbying cost of WellPoint can be beneficial for
all health insurance companies if the changes they desire in the
health-care overhaul bill are accepted by lawmakers, who receive
large contributions from these companies in the form of lobbying
costs.
The desired changes will have a long-term effect on the
bottom-line of these companies and hence, even though the lobbying
costs reduce the income for a particular quarter, they can be
viewed as investments for the long-term benefit of the company.
WellPoint currently carries a Zacks #3 Rank, which translates
into a Hold rating for the short-term, while both Aetna and CIGNA
carry a Zacks #2 Rank, implying a short-term Buy rating.
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