Recent Drop in WellPoint Stock Sparks Lawsuit

Indianapolis, INA securities class action lawsuit has been filed by WellPoint Inc.'s shareholders because of the health insurer's recent drop in their stock market price that occurred the same day it had lowered its earning guidance for 2008.

WellPoint is licensed to provide Blue Cross or Blue Cross and Blue Shield health insurance in 14 states and is the largest provider in the country based on its commercial membership.

On March 10, 2008, the health insurance provider cut its prior earnings guidance for 2008, stating lower-than-expected enrollment in their plans that offers full insurance to their customers. The reason for the cut is due to rising healthcare costs and an economic environment that has proved to be quite challenging.

The lawsuit, which has been filed in U.S. District Court for the Southern District of Indiana, is looking to represent all of those who had invested in WellPoint's common stock between the dates of January 23, 2008 and March 10, 2008. Their claim has been filed under the Securities and Exchange Act of 1934 based on filings WellPoint made with the SEC, reports by security analysts, and the earnings reported by WellPoint fourth quarter earnings reported on a January 23 conference call and a conference call that was conducted on March 10, in addition to media reports.

James Kappel, a WellPoint spokesman, has said that the company has not been served with the complaint. He has said that the company believes that the claims are baseless and that WellPoint intends on defending themselves against the complaint.

The defendants that have been named in the complaint are executive vice president and chief financial officer Wayne DeVeydt; the president, chief executive officer and board of directors member Angela F. Braly; and chairman of the board Larry Glasscock.

The lawsuit alleges that WellPoint made statements that were false and misleading and that they did not disclose facts regarding their medical enrollment levels and the medical costs that they were facing. Investors were unaware that WellPoint was experiencing rising medical costs and reverse development. The suit also alleges that the enrollment was more toward the less-profitable products offered by the company rather than the fully insured products that are more profitable. The suit further charges that the weight of the mixed enrollment had a negative impact on WellPoint's profits through until 2008. As a result, the defendants knew they would not be able to reach the earnings guidance that they had provided.

When the information was revealed on March 10, WellPoint's stock dropped 28.3%. With over 54 million shares traded, the closing cost was $47.26. The trading volume was well above the average trading volume for WellPoint, the suit states.

The damages that the plaintiffs seek are to compensate them for the losses that they experienced as a result of the alleged misrepresentations.


By Ginger Gillenwater