By Mike Wells
6/11/2010 © Health News Florida
Last month, a former director of WellCare Health Plans publicly called for the company to be more transparent in disclosing its financial issues. But Regina Herzlinger’s request went nowhere.
On Thursday, at the Tampa company’s annual meeting, the Harvard Business School professor was replaced on the board of directors, and a proxy vote calling for WellCare to disclose its political spending went down to defeat.
The official shareholder election results were released Thursday afternoon in an SEC filing, which showed about 23 percent of the votes cast were in favor of the proposal. According to the filing, shareholders owning 87.46 percent of the company’s common stock were or represented by proxy at the meeting.
The proposal, led by New York-based investor Amalgamated Bank, would have required WellCare — a major contributor to Florida politicians and parties — to provide semi-annual reports about money spent on candidates, political parties and other types of organizations that try to influence campaigns, according to a proxy statement released April 30.
Scott Zdrazil, Director of Corporate Governance for Amalgamated, said he continue to discuss the issue with WellCare in hopes it will one day increase transparency in reporting political contributions.
“They need to step up to what’s increasingly become a standard company practice in the health care insurance industry,” he said.
Amalgamated holds 11,611 shares of WellCare through a private investment fund.
Zdrazil said he suspects many who supported the transparency effort simply abstained. The company’s SEC filing reported that holders of 6,230,616 shares abstained from voting on the issue.
The issue of corporate spending transparency has become even more important since the U.S. Supreme Court ruled earlier this year that companies can spend shareholder money to support or oppose individual candidates, he said.
But WellCare's board of directors, in the April 30 proxy statement, recommended that shareholders reject the proposal. It argued, in part, that information about political contributions is already available in public databases.
In the end, those who voted followed the board’s recommendation.
Herzlinger addressed her concerns with WellCare’s level of financial transparency in a recent column for the HuffingtonPost.com.
“Can transparency be obtained through voluntary efforts? Obviously not. Instead of backing transparency, most health-care participants raise objections, including consumers' lack of interest and the allegation that transparency's costs will exceed its benefits, and that the measurement of quality is infeasible. But the many benefits of transparency trump its costs. And although health-care transparency measures are not as yet well developed, with time they will be.”
In recent years, Amalgamated has pushed for disclosure on political spending in a broad range of industries; it focused on the health-care industry this year because of the level of interest, Amalgamated attorney Con Hitchcock said in an interview last month with Health News Florida.
The proxy filing indicated that the New York City Employees Retirement System, another WellCare investor, would co-sponsor the disclosure proposal. Amalgamated, founded by a labor union in the 1920s, describes itself as “America’s Labor Bank” and manages investments for unions and public-employee benefit plans.
In the proposal, Amalgamated pointed to reports that showed WellCare made at least $2 million in political contributions since the 2002 election cycle. Also, it said WellCare paid money to trade associations, with an “undisclosed and unknown” amount of those funds going to political activities.
The $2 million figure in the proxy statement appears to substantially underestimate the amount that WellCare has spent on politics in recent years. In Florida alone, WellCare and its affiliated companies have contributed about $2.2 million to state candidates, parties and political committees since January 2001, according to information in a Department of State database.
Already in the 2010 election cycle --- which generally describes the two-year period leading up to the November 2010 elections --- WellCare has contributed about $128,000 to Florida candidates, parties and committees. The largest chunk of that, $90,000, has gone to the Republican Party of Florida, the state records show.
Many health insurers and other types of insurance companies spend large sums on political activities. But WellCare has a particular interest in public-policy decisions because its business depends on providing managed care through Medicaid and Medicare.
As an example, the managed-care industry lobbied heavily during this year’s legislative session for changes that could have forced hundreds of thousands of Medicaid recipients to enroll in HMOs. The proposals failed to pass but are expected to return during the 2011 session. Along with creating additional customers for WellCare and its competitors, the proposals could open new lines of Medicaid business, such as long-term care.
“The company believes that active participation in the political life of the communities in which it does business is in the best interests of the company and its stockholders because many national and local public-policy decisions affect its businesses,’ WellCare’s board said in the proxy statement.
“As a result, the company participates in policy debates on many issues to support the company’s positions and, where permitted by law and deemed appropriate by management, makes strategic political contributions and expenditures from time to time that promote the company's business objectives,” the board continued.
Amalgamated has proposed similar political-disclosure requirements in the past at companies such as Comcast and American Financial Group, according to company news releases. The WellCare proposal came about two months after Amalgamated and a group of other large investors launched a broader effort to try to spur companies to provide information.
That effort stemmed from a U.S. Supreme Court decision in January that eliminated longstanding limits on corporate spending in federal elections, according to the non-profit Center for Political Accountability.
While public databases make it relatively easy to track direct contributions to candidates and parties, the Supreme Court ruling has increased concerns that corporations will funnel money through trade associations and other organizations without similar disclosure.
--Mike Wells is an independent journalist in Tampa. Questions or comments can be directed to Carol Gentry, Editor, at 727-410-3266, or by e-mail.