On Friday afternoon May 21, WellPoint released the official tally for the voting from their contentions annual shareholders meeting on the 18th. Our resolution to return Wellpoint to non-profit status received over 30 million votes, 9.4% of the shares voted. That is a jaw dropping vote of no confidence in the management of this company.
The Anthem/WellPoint annual shareholders meeting used to be a yawn – carefully scripted, lightly attended, and mercifully brief. That is until Hoosiers for a Commonsense Health Plan butted in. I’m a simple country ER doctor, and along with other pesky activist shareholders, I’ve been intruding on these meetings for the past four years. The meeting on Tuesday, May 18 was far from boring.
WellPoint Inc is the largest health insurance company in the country, the product of a free market feeding frenzy in the healthcare marketplace during the 80’s and 90’s. Merger mania consumed traditional non-profit Blue Cross plans from Maine to California, and when the final deal was sealed in 2004, WellPoint covered 35 million American lives from their headquarters in Indianapolis.
Last year I set out to change that. With help from other activists and experts, I crafted a shareholder resolution to nudge the company back toward its Blue Cross charitable non-profit roots. The SEC guidelines for such proposals are daunting, but we succeeded in placing it on the proxy statement for the May 18 meeting.
2010 has been a tough year for the behemoth, as FDL readers know. Even though the reform bill was largely authored by former WellPoint VP Liz Fowler, they secretly funneled money to the Chamber of Commerce for attack adds on health care reform. While the media storm following the announcement of WellPoint’s 39% rate hikes was still growing, Congressional investigators revealed WellPoint had spent $27 million on lavish executive retreats for top brass.
WellPoint CEO Angela Braly’s grilling in front of Congress was another low point, but the bad news kept rolling in – gaming the medical loss ratio requirements in the reform bill, the breast cancer rescission scandal, and they just keep coming.
And then May 18. The meeting opened promptly at 8 AM at the Indianapolis Hilton. In a non-descript room on the 9th floor about 25 stockholders had no trouble finding seats. We were greatly outnumbered by the WellPoint Board, top executives, and security detail. The tone of the meeting changed when I approached the microphone to present our resolution, on which the WellPoint Board had recommended a no vote.
Standing near the microphone was a scowling WellPoint security woman with an ear bud, and as I presented the resolution (as required by SEC regulations) she hovered nearby. When I had been speaking for slightly over five minutes, she came up right behind me, literally breathing down my neck, and then leaned in front of me, commanding me to stop speaking, that my time was up, even though no time limits had been set. I replied matter of factly that I was not done yet and returned to my prepared statement. I read the remaining paragraphs, while she glowered.
From there the atmosphere in the room grew increasingly contentious. Three more hostile shareholder resolutions were presented, although none as bold as ours.
Then a brief respite, as the meeting turned to some feel-good corporate videos meant to soothe and reassure restless investors and a short, vacuous talk from CEO Angela, only notable for making no mention of any of the controversy engulfing the company.
Finally, the formal meeting was adjourned, and the traditional shareholder Q&A session began, which for several years now has been Angela’s least favorite part of the day. It immediately turned ugly as the security detail tried to cut off a lawyer from St Louis whose premiums on her small business health insurance policy had been jacked up 41%. After she complained and appealed, they had finally reduced the increase and claimed that they must have made “a fat finger mistake” when they figured her rate increase the first time. She was not mollified, and came to the meeting to press her case.
Not long after, while there were still a half dozen dissident shareholders waiting to speak, there was a sudden disturbance at the front of the room, and Angela’s tense voice announced a medical emergency and that the meeting was over. Someone appeared to have collapsed in the front row.
As the security detail started to clear the room, I went straight to the front. I reminded WellPoint’s chief security guy that I’m a practicing ER physician, but he pushed his chest into mine and wouldn’t let me through. I recognized one of WellPoint’s executives who is a retired physician kneeling by a man supine on the floor. I got his attention, and he gratefully called for me to come over and help. Security yielded.
It was then that I realized my “patient” was William “Bucky” Bush, WellPoint board member, brother to the first President Bush, and uncle to the second.
Patient confidentiality prevents further discussion of the details. Suffice it to say that Mr Bush was doing OK, and all I really did was stand by until the ambulance arrived.
It wasn’t until I found my way to the elevator lobby, and the reporters started pressing me with questions, that it dawned on my how ironic the situation was. I had gone to the meeting to cause the Board discomfort, and then attended to one of my adversaries. WellPoint’s Board is studded with high profile power players, but none with a name as powerful as Bush.
The Wall Street Journal piece “WellPoint CEO Is Grilled” reported on the meeting, but also more bad news for the company, most ominously how the stock dropped almost 10% on April 30 on the news that the company had made mathematical errors in its California rate filings. Institutional investors are restless:
“Jay Nogueira, vice president at one of the company’s top 10 shareholders, T. Rowe Price, said the stock won’t bounce back until investors were convinced that there isn’t another chapter in the hostility with the government. ‘These guys are not dealing well with the public limelight,’ said Mr. Noguiera.”
Bloomberg reported May 17 that Warren Buffett has sold his one million share stake in WellPoint. Could we be approaching some sort of tipping point? Could the health insurance industry be a bubble that will burst?
The story isn’t over yet. Our shareholder resolution for WellPoint to return to its non-profit Blue Cross roots will be back next year. And the SEC has proposed a new regulation that would allow shareholders to directly nominate corporate board members called "Proxy Access." If this goes into effect this fall as expected, I intend to run for the WellPoint board.
In its current draft form, the Proxy Access process for a large corporation like WellPoint would require 1% of the outstanding shares in order to nominate a director. With 430 million shares outstanding, I would need 4.3 million shares for the nomination. 30 million shares just voted for our resolution. You do the math.
Rob Stone M.D. practices emergency medicine in a community hospital in the Hoosier Heartland. A gardener, a grandfather, and a teacher, he is the Director of Hoosiers for a Commonsense Health Plan and on the board of Physicians for a National Health Program.