Flush with cash from a strong finish to 2010, WellPoint Inc., parent of Anthem Blue Cross of Connecticut, has become the latest health insurer to announce it will reward shareholders with a sizeable payout, The Associated Press reports.
The Indianapolis insurer on Wednesday unveiled a plan to spend about $400 million this year on its first cash dividend, even as managed care companies warn that the massive health care overhaul passed last year by Congress will squeeze their businesses in the coming years.
Big health insurers used to offer token annual dividends amounting to only a few cents. But that started to change when UnitedHealth Group Inc. — the largest health insurer based on revenue — said last spring it would spend about $560 million over 12 months as it started paying quarterly dividend payments of 12.5 cents per share.
Earlier this month, Hartford’s Aetna Inc. said it will start paying a 15 cent quarterly dividend. Then on Wednesday, WellPoint’s board declared a quarterly cash dividend of 25 cents per share, payable March 25 to shareholders of record as of March 10.
The steady cash flow from larger dividends can make a company’s stock more attractive to investors. This is especially true in the managed care sector, where investors have worried about how companies will be affected by the overhaul.
WellPoint, which also runs Blue Cross Blue Shield plans in several other states, has forecast a $300 million hit this year from a new provision that requires insurers to spend minimum percentages of their premiums on medical care or offer rebates. Companies also will face new coverage provisions in 2013 and 2014 and more taxes, balanced by millions of new policyholders entering the market.
