WellPoint Inc.WLP

WellPoint has the largest medical membership among health insurers, giving it significant bargaining power with health-care providers and leveraging its largely fixed cost structure.

We think the market has overreacted to the threat posed by reform legislation. Even if reform were to pass in its current form, we think the impact on WellPoint would be modest.

Some proposed health-care reforms would be a net positive for WellPoint. The company is strong in the individual and small-group market, and it could gain customers as efforts are made to reduce the number of uninsured Americans.

WellPoint enjoys the best-known and most-trusted brand name in the business. It is the exclusive licensee of the Blue Cross and/or Blue Shield brands in 14 states.

Unlike its peers in other states, WellPoint generally doesn't have to compete with nonprofit Blue Cross and Blue Shield plans. Read more 

President Obama and the Democrat-dominated Congress are looking to enact major health-care policy reform. Some reform proposals could have a significant negative effect on WellPoint's business.

Medicare controls over $450 billion of health-care spending, giving it better administrative cost leverage and much lower provider rates than any private MCO. If a new public insurance program were created with rates linked to Medicare, it would have significant competitive advantages.

Some of WellPoint's peers are still recovering from 2008's underwriting missteps. If WellPoint doesn't recognize future shifts in medical cost trends and change prices accordingly, the effect on earnings can be drastic.

Rising unemployment results in a smaller market for employer-based insurance, and fewer members can result in deleveraging of WellPoint's fixed costs.

WellPoint's $23 billion investment portfolio could lose value if financial markets decline. Read more