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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