WellPoint Lobbies - Analyst Blog

WellPoint, Inc. (WLP) spent $1.1 million during the third quarter 2010 to lobby the federal government on issues tied to the recently passed health care reform bill. WellPoint spent an equal sum on lobbying during the second quarter of 2010, and a little less in the third quarter of 2009 as against the third quarter of 2010.

WellPoint lobbied the Congress, the Department of Health and Human Services and the Centers for Medicare and Medicaid Services.

Further, WellPoint lobbied the government on Medicare Advantage and on health reform issues. The company also lobbied on insurance exchanges, quality improvements and medical loss ratios.

WellPoint expects serious impacts of the health reforms on itself, and believes that insurers like WellPoint will be required to spend certain percentages of premiums on medical care or offer rebates to consumers.

Competitor UnitedHealth Group Inc. (UNH) spent $550,000 in the third quarter to lobby the Congress and the White House on health care reform overhaul, which targets at providing health care services to millions of uninsured people.

UnitedHealth also lobbied for Hiring Incentives to Restore Employment Act, the Unemployment Compensation Extension Act of 2010 and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Besides, UnitedHealth also lobbied the Office of Management & Budget.

We believe that WellPoint remains wary of the impact of the health insurance reforms and expects these reforms to increase unemployment and stretch profit margins of WellPoint and its competitors. The resulting downward pressure is likely to overshadow the stock.

However, WellPoint relies on growth through acquisitions and divests non-core assets. It has completed many deals over the past few years. The sale of NextRx has strengthened its balance sheet and fueled a major stock repurchase. It has, in turn, rewarded shareholders with significant returns on their capital. The acquisitions have also enhanced WellPoint's financial standing with expanding margins and increasing top line.

Currently, WellPoint carries a Zacks #3 Rank, which translates into a short-term Hold recommendation, indicating no clear directional pressure on the stock over the near term.