Wellpoint is the largest health insurance provider nationally with over 34 million members. Through strategic acquisitions, Wellpoint has expanded its market presence and now operates Blue Cross Blue Shield plans in 14 states. Wellpoint aims to continue growing by targeting the uninsured, elderly, and large national employer accounts. Its strategy also includes wellness initiatives like investments in luxury health resorts to promote preventative healthcare and keep membership healthy.

1. Introduction
In the evolving insurance industry, Wellpoint stands on top with an astounding 34 million members.
Through strategic growth choices and strong leadership, Wellpoint is positioning itself as the national
leader in Healthcare for decades to come. The focus of this report will be to analyze Wellpoint,
evaluate its strategy, and to make strategic recommendations to ensure longevity
Wellpoint’s Growth
Wellpoint Inc was born from the acquisition of Wellpoint Health Networks Inc by Anthem Inc. Post
acquisition, Wellpoint became the largest healthcare provider in the country with 28 million customers.
Wellpoint offers a wide array of products and services in 14 different states as a licensed Blue
Cross/Blue Shield (BCBS) agent, and offers UniCare service for those who do not have BCBS
available.
Since Wellpoint Inc.’s conception in 2004, it has continued to grown through acquisitions. Recent
acquisitions include WellChoice out of New York, and Lumeno’s out of Virginia. With these recent
acquisitions and capitalizing on opportunities, Wellpoint has penetrated the market to deliver
shareholders unprecedented results. 1/10 individuals insured, are affiliated with Wellpoint. Shown
below is the family of Wellpoint companies.
Wellpoint Family of Companies
Anthem BCBS Anthem Dental OneNation Benefit
Administrators
Blue Cross of California Anthem Life Insurance Co. PrecisonRX
BCBS of Georgia Anthem Prescription Mgmt UniCare
BCBS of Missouri Anthem Vision United Government Services
BCBS of Wisconsin HealthCore Wellpoint Behavioral Health
Empire BCBS (New York) HealthLink Wellpoint Dental Services
Lumenos Health Management Corp. Wellpoint Pharmacy Mgmt
AdminaStar Federal Golden West Dental & Wellpoint Worker’s
Vision Compensation Managed
Care Services
Anthem Behavioral Health Meridian Resource Co. Wellchoice New Jersey
Current News
Currently Wellpoint maintains it’s dominance in the industry with just over 34.2 million subscribers,
with 1.3 million of those coming from the new Medicare Part D Plan. Lawsuits have plagued Wellpoint
in recent times. Most recently a former employee has filed suit against the firm claiming gender
biasness, and termination due to ‘whistleblowing’ on questionable business practices. The employee

2. questioned whether special deals provided to dentists under the Connecticut Medicaid Program were
legal. Wellpoint Spokesman Jim Kappel reaffirmed the stellar reputation among industry analysts on
Wellpoint’s corporate culture practices of embracing diversity and treating associates fairly.
Other lawsuits include the investigation of whether Wellpoint systematically would eliminate BCBS
members’ coverage due to expensive or high risk diagnosis.
CEO Larry Glasscock recently spoke at the Goldman Sachs 27th Annual Global Healthcare Conference
on June 14, 2006. Glasscock stated, “We are very much disciplined at not giving up profit margin for
membership.”
Wellpoint’s Business Foundation
Vision
WellPoint’s goal is to provide affordable quality healthcare while meeting the needs of their diverse
customers. They want to be a company that people can trust. WellPoint states their vision is to
“transform health care and become the most valued company in our industry”. The result will be:
Improved health, health care quality and affordability
Increased member satisfaction and enrollment
Superior returns to shareholders
Enhanced opportunities for associates
A highly trusted and respected national organization
Mission
WellPoint’s mission is “to improve the lives of the people we serve and the health of our
communities.” The company carries out this mission by creating many different health benefits and
financial services to meet the needs of their diverse customer base, and by being involved in the
communities through foundations and corporate social responsibility programs.
Values
Wellpoint has five core values that guide them and these are:
Customer First
actively pursue ways to improve quality and service
Lead through innovation
continuous change to provide products and services to meet customers’ needs
One Company, One Team
treat everyone in the company with respect, dignity, and common courtesy

3. Personal Accountability for Excellence
establish and meet high-performance expectations
Integrity
always act ethically, honestly, and fairly
Strategic and Financial Objectives
Expects to yield $1.14 a share net earnings 2Q of 2006, and $4.63 for the year
Seek out new markets of entry per acquisition and corporate growth
Aggressively pursue large National accounts
Seek to insure the uninsured
Lower costs associated with SGA
Maintain and improve strong brand recognition
Insurance Industry
The healthcare industry is the largest in the nation, accounting for over $1 trillion goods and services
each year. Coordinately it is also the largest employer, with 1 out of 9 Americans working
The Insurance industry is growing in terms of revenue, but shrinking in the total number of firms.
Wellpoint and United HealthCare in particular have been very aggressive in acquiring smaller firms.
Shown below is the United States population divided based on insurance indicators. The corresponding
graph depicts national opinion on health insurance companies.
Commonweath Survey 02/2006 The Harris Poll 2005
Although nearly ½ of polled Americans were not satisfied with the level of customer service provided
by Health Insurance companies, it had rose 16% favorable from the year prior. As larger firms compete
aggressively for market share it appears that quality of service delivered is also increasing.
Health Insurance

4. Industry
Competitive Rivalry
Strong industry rivals
Industry growth based on acquisition
Product offerings similar
Shareholder expectation drives constant innovation
Supplier Power
Generic drug options is forcing name brands to lower costs
General Healthcare costs still on the rise but slowing down in comparison to previous years.
Physicals/Hospitals also in highly competitive industries. Prefer strategic partnerships
Hospital Consolidations limit options, raising costs.
Substitute Products
Comparable Options Available
Health Savings Account
Self Insure
Government Aid
Buyer Power
Generally based on employers’ choice
Cost is increased w/o group participation
Several Markets bordering monopoly (Indiana 95% Wellpoint customers)
New Market Entrants
Credibility essential
Too expensive to compete nationally
Economics of Scale will force entity to be more expensive
H EALTH CARE
INDUSTRY
Although the industry has the potential to be very profitable, it is not an attractive industry for a new
entrant. A successful localized firm would be acquired inevitably by one of the larger firms.
Wellpoint competes head on with a few large firms in several markets. United Healthcare Group
(UNH) is following a similar acquisition strategy as Wellpoint. Most recently, with it’s approved
acquisition of PacifiCare Health Systems Inc for $9.2 billion.

5. Other notable contenders include Aethna Inc. (AET) who was the first to offer full service health
insurance on a national front. Cigna (CI) who operates a variety of products on a global scale is also a
considerable threat. Shown below is an industry profile of Wellpoint and its competitors, as well as a
revenue/net income comparison. The final chart is a 3 year stock history between Wellpoint’s largest
rival United Healthcare, and the S&P 500.
High
Profit

6. Low
Few Localities F Many Localities
e Many Localities
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i

7. t
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Geographic Coverage
Geographic Coverage Geographic Coverage Geographic Coverage Geographic
Coverage Geographic Coverage
provided by SEC Filings
Separating Wellpoint from the Competition
Wellpoint’s core business is the 14 Blue Cross/Blue Shield it facilitates. BCBS is the nation’s largest
form of insurance with 1/3 insured being a BCBS member. Also a strong link is made between
insurance regulation and BCBS due to the high volume of members, including Federal/State
employees. BCBS is also federally funded for the task of Medicare and Medicaid payments.
Also due to recent legislation and a strong push by the current President Health Care Spending
Accounts are projected to be on the rise. Since Wellpoint acquired Lumenos’, which specializes in
private investments, it is prepared to handle future market demands.

8. Due to the large subscriber base, Wellpoint has unprecedented bargaining power with physicals and
health care facilities to ensure the lowest cost of services.
With the breadth of products Wellpoint offers it can consult all benefits into one carrier. A 2003 Limra
study pointed out that, ¾ employees preferred to consolidate their coverages to one carrier. Having
multiple coverages also increases the 80% annual persistency rate (i.e. lose 20% of your clients). With
multiple options as well, bargaining strength is increased.
Strengths Weaknesses
Strong bargaining power per customer base High cost of SGA
Wide array of products and services Synergy of previous mergers not optimized
“non-core” investments may distract
which leads to higher retention management
Strong brand recognition
BCBS provider for 14 states
Economics of Scale on Operations
Opportunities Threats
45 million uninsured Competitors more efficient operating
National Employee Accounts principles
Acquisitions of smaller firms Lawsuits
Capitalize on competitors dissatisfied Spikes in health care costs
customers (generally nearly 50%)
Strategy in Action
Wellpoint’s plan for future growth is to target the uninsured, elderly, and large national accounts. "If
you go back five or seven years, we didn't have a product to sell national accounts," CFO Dave Colby
said. "They could go to our competitors and deal with one entity." In the last 5 quarters Wellpoint has
acquired 1.5 new members via National Accounts. Bringing the total to 9.3 million and Colby believes
that there is room for growth. National Accounts are derived from Employers which represents over ½
the insurance market.
Wellpoint feels that 30 out of the 45 million uninsured could be potential members. Including Medicare
eligible members who have yet to sign up, as well as the youth who may not feel they need it. 378,000
uninsured because Wellpoint members in 2005.
Currently sitting at 1.3 million new Medicare Plan D members, Wellpoint is projecting to have 2
million new customers from the program by year’s end. Wellpoint is anticipating the swelling of the
elderly demographic.
A purely financial strategy came with a $50 million investment into 2 high end luxury resorts and spas.
WellPoint Chief Financial Officer David Colby said the company's stake in the luxury centers is a
chance to promote wellness and disease prevention. He added that WellPoint expects the resorts to be a

9. profitable venture. "Looking at the health-care marketplace and given our mission and definitely our
goal of promoting healthy living and well-being, this is certainly very consistent of our goals," "We
want to keep people healthy," he said. "Well-being is good in our business.”
In May of 2006, Wellpoint agreed to acquire Ohio based HMO QualChoice Health plan, to acquire
more of the Medicaid market share. Qualchoice offers 68,000 new members to the Wellpoint family.
The deal is expected to close in the later part of 2006.