WellPoint blocked from new patients in 2 plans

Medicare suspends WellPoint from enrolling patients in 2 plans following audits

• On 5:00 pm EST, Tuesday January 13, 2009

INDIANAPOLIS (AP) -- WellPoint Inc. said Monday the Centers for Medicare and Medicaid Services suspended the company from enrolling new patients in the health insurance Medicare Advantage plan and the prescription drug benefit, Medicare Part D.

WellPoint, the nation's largest managed-care company based on membership, said it has been working with the federal agency over the past six months to resolve issues identified as a result of both internal and government audits.

"Due to a sharp increase in the past twelve days in beneficiary complaints about WellPoint and WellPoint's self-disclosures regarding beneficiaries being denied prescription drugs, CMS is taking this immediate action to ensure that WellPoint focuses its efforts on correcting its significant compliance problems before further expanding the number of enrollees in its Medicare plans," the agency said in a notice to WellPoint.

The Indianapolis company in a statement said that its work included "detailed action plans" to the agency. The company also said it had "engaged an independent third party to provide CMS with ongoing assessments regarding our compliance, including verification of systems, processes and procedures."

WellPoint expressed surprise at the agency's action, saying it had been meeting regularly with CMS. The decision does not affect current Medicare beneficiaries enrolled in the company's plans.

WellPoint said it had "made significant progress in addressing" the agency's issues and that it would continue to work with CMS on a resolution.

Citi analyst Charles Boorady cut his rating on the company to "Hold" from "Buy" and lowered his price target to $47 from $52, citing both the enrollment suspension and the company's investment loss of $349 million during the fourth quarter. He said the CMS sanctions can be blamed on the company's in-house pharmacy benefit manager and the problem can likely be addressed by outsourcing the service.

"The operational failures at WellPoint's PBM were so severe as to result in sanctions against its Medicare Advantage plans as well," he said, in a note to investors.

Shares of WellPoint closed down $2.15, or 5.3 percent, to $38.81.

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