Recasting Health Net
After several years of lackluster growth and proposed cutbacks in federal Medicare payments, Health Net HMO is retrenching its programs for seniors.
While some industry observers view Health Net’s moves as a partial retreat from the Medicare business, Health Net executives prefer to call it a “shift in direction.”
Michael Meyers, a vice president for Health Net’s Seniority Plus plan, said the firm has decided to focus on marketing its Medicare plan to large groups--usually employers’ retirement programs--and reduce its focus on selling its plan to individuals.
The Woodland Hills-based HMO has laid off about 60 people in its Seniority Plus program, many of them in sales and marketing jobs.
About half of those employees have found other jobs within the company, said spokesman Ron Yukelson.
Meyers insisted that the individual market is “still very important” to the company.
But industry observers said Health Net’s move amounts to a retreat from a business that is increasingly competitive in California and has not been as profitable as the company once hoped.
With 154,000 members, Health Net’s Seniority Plus plan is the state’s third-largest Medicare HMO for people age 65 or older and disabled people.
Its membership lags far behind the two biggest Medicare plans: PacifiCare Health Systems Inc.’s Secure Horizons plan has 606,000 enrollees, while Kaiser Permanente’s Senior Advantage program has 429,000 members, according to federal statistics.
Health Net, the HMO operated by parent firm Foundation Health Systems Inc., was a relative latecomer to the Medicare business. PacifiCare and the former FHP International (now part of PacifiCare) pioneered HMOs for seniors in California and helped to make such plans highly popular in the state.
With about 40% of all Medicare beneficiaries in California already enrolled in HMOs--enrollment in private HMOs is voluntary for Medicare recipients--some industry experts believe that the market is largely saturated.
In other words, many of the people who find HMOs an attractive alternative--often younger, healthier seniors--have already joined one.
Right on the Money
Leonard Schaeffer may have had the last laugh on this one.
A few years back, Schaeffer, WellPoint Health Networks Inc.’s chief executive, came under fire from consumer activists and state regulators as he sought to convert WellPoint’s not-for-profit Blue Cross of California unit into a for-profit company.
State law required Blue Cross to establish a health-care foundation to compensate Californians for the years that nonprofit Blue Cross had operated as a tax-exempt company.
Among the points of controversy at the time: How would WellPoint fund the foundation, through cash or stock? And how much of each?
Some consumer activists, skeptical of Schaeffer and WellPoint’s motives, argued that the charities should get their cash upfront.
Schaeffer--confident of the prospects for his newly restructured company--argued that the WellPoint stock would be more valuable. Turns out, he was right.
WellPoint’s stock has soared during the last few years, rising from the mid-$20s in late 1996 to close Wednesday at $71.50 on the New York Stock Exchange.
In the latest of three public stock offerings for the California HealthCare Foundation last month, Woodland Hills-based WellPoint sold 12 million shares at $72 each, raising $864 million for the charitable fund.
As a result of WellPoint’s success in the marketplace and on Wall Street, the value of the health-care charities’ endowment has risen from about $3 billion in cash and stock in 1995 to about $3.9 billion today.
“My point at the time,” said Schaeffer, referring to the controversy in 1994 and 1995, “was that the stock would be more valuable than the cash. We have more than fulfilled our promise.”
Times staff writer David Olmos can be reached by e-mail at david.olmos@latimes.com or by fax at (213) 237-7837.
