The Empire Strikes Back

A long time ago, in a land far, far away.

And so the story begins, The Imperial Fleet, led by Princess Leia and Luke Skywalker are pitted against the insidious evil Empire and Darth Vader. The battle is fierce as good is pitted against evil.

This blog post is not about the epic movie Star Wars. It is about The Empire… Empire Blue Cross. The evil Empire has struck a fatal blow against small business owners and brokers.

Empire Blue Cross has announced they will be making drastic changes to their health care plan line up and will be cutting compensation to their brokers.

In short, the quality health care plans that New York small business owners and their employees have come to depend on for many years, will be gone.

Empire will be replacing their current health care line-up with higher priced plans and reducing benefits. Broker compensation will be cut back to such a low level that it will no longer make financial sense for brokers to recommend Empire’s health plans.

According to Empire, these changes are being made to cut losses and increase profits.

Is it time to start worrying about the financial health of Empire?

WellPoint the parent company of Empire, reported 2nd qtr earnings of $1.83 per share which beat Wall Street estimates by 3 cents. However, earnings dropped to $701 million this year compared to $722 million reported the 2nd quarter of 2010.

According to a 2009 report by WellPoint, 87 cents of every premium dollar paid into health care plans, “is spent on providing medical services to members: physician services, hospital costs (inpatient and outpatient costs), drugs and other medical services.leaving a mere 3% for the insurers’ profits.”

The hidden factor of course is that profits are calculated after payroll and executive compensation. The CEO of WellPoint Angela Braly’s, compensation rose in 2009 by 52%. Giving her a whopping total comp package of over $15 million. This pales of course in comparison to Stephen Hemsley, the CEO of United HealthCare whose compensation topped $102 million in 2009.

So there you go, it’s obvious Empire needs to increase profits and raise executive compensation. It’s just a darn shame they have to do this on the backs of small business owners and brokers.