WellPoint Increases Lobbying Cost - Analyst Blog

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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