References to the terms "we", "our", "us" or the "Company" used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, refer to WellPoint, Inc. (name changed from Anthem, Inc. effective November 30, 2004), an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries.

Certain prior year amounts have been reclassified to conform to the current year presentation.

The structure of our MD&A is as follows:

II. Overview

III. Significant Transactions

IV. Membership - June 30, 2008 Compared to June 30, 2007

VI. Results of Operations - Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007

VII. Results of Operations - Six Months Ended June 30, 2008 Compared to the Six Months Ended June 30, 2007

VIII. Critical Accounting Policies and Estimates

IX. Liquidity and Capital Resources

X. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

I. Executive Summary

We are the largest health benefits company in terms of medical membership in the United States, serving 35.3 million members as of June 30, 2008. We are an independent licensee of the Blue Cross and Blue Shield Association, or BCBSA, an association of independent health benefit plans. We serve our members as the Blue Cross licensee in California and as the Blue Cross and Blue Shield, or BCBS, licensee for: Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (as the Blue Cross Blue Shield licensee in 10 New York City metropolitan and surrounding counties, and as the Blue Cross or Blue Cross Blue Shield licensee in selected upstate counties only), Ohio, Virginia (excluding Northern Virginia suburbs of Washington, D.C.) and Wisconsin. We also serve customers throughout the country as UniCare. We are licensed to conduct insurance operations in all 50 states through our subsidiaries.

Operating revenue for the three months ended June 30, 2008 was $15.5 billion, an increase of $0.5 billion, or 3%, over the three months ended June 30, 2007. Operating revenue for the six months ended June 30, 2008 was $30.8 billion, an increase of $0.9 billion, or 3% over the six months ended June 30, 2007. These increases were primarily driven by premium rate increases for all medical lines of business, growth in our Medicare Advantage business and increased reimbursement in the FEP program. These increases were partially offset by the loss of the New York State prescription drug contract, fully-insured membership declines in National Accounts and Local Group businesses, including UniCare, the conversion of the Connecticut Medicaid program from fully-insured to self-funded and our exit from the Ohio Covered Families and Children Medicaid program, or Ohio CFC program, on April 1, 2008.

Net income for the three months ended June 30, 2008 was $750.5 million, a 10% decrease over the three months ended June 30, 2007. Our fully-diluted earnings per share, or EPS, was $1.44 for the three months ended June 30, 2008, which included $0.03 per share of net realized investment losses and was a 7% increase over the EPS of $1.35 for the three months ended June 30, 2007. The decline in net income reflects higher medical costs, which are further described below. The increase in EPS was the result of having fewer shares outstanding during 2008. The shares outstanding declined primarily due to share buyback activity resulting from our share repurchase program. Net income for the six months ended June 30, 2008 was $1.3 billion, a 17% decrease over the six months ended June 30, 2007. Our fully-diluted EPS was $2.50 for the six months ended June 30, 2008, which included $0.09 per share of net realized investment losses and was 4% less than the EPS of $2.61 for the six months ended June 30, 2007. The decline in net income and EPS reflect higher medical costs, which are further described below, with the decline in EPS being partially offset by the impact of our share repurchase program.

Operating cash flow for the six months ended June 30, 2008 was $1.1 billion, or 0.9 times net income. Operating cash flow for the six months ended June 30, 2007 was $2.7 billion, or 1.7 times net income. The decrease in operating cash flow from 2007 was driven primarily by the timing of payments from the Centers for Medicare and Medicaid Services, or CMS, the timing of collecting our self-funded receivables, increases in other accounts receivables due to a delay in reimbursements from other BCBSA plans, lower net income in 2008 compared to 2007 and lower tax deductions related to reduced stock option exercises. During 2007, the operating cash flow included the receipt of additional CMS payments related to the third quarter of 2007. This similar payment in 2008 was received in July 2008. The 2007 operating cash flow would have been approximately 1.3 times net income if these additional payments were excluded. The increase in receivables was due to membership growth, certain contractual modifications and other actions we have taken in response to our system migrations. We expect this increase in receivables to decline in the latter half of 2008 as we continue to collect our receivables. The reduction in net income reflects higher medical costs, which are further described below.

II. Overview

Beginning January 1, 2008, we implemented a new organizational structure designed to support our strategic plan, which reflects how our chief operating decision maker evaluates the performance of our business. As a result of this new organizational structure, we manage our operations through three reportable segments: Commercial; Consumer; and Other. For additional information, see Note 12 to our unaudited consolidated financial statements as of and for the three and six months ended June 30, 2008 included in this Quarterly Report on Form 10-Q.

Our Commercial and Consumer segments both offer a diversified mix of managed care products, including preferred provider organizations, or PPOs; health maintenance organizations, or HMOs; traditional indemnity benefits and point-of-service plans, or POS plans; a variety of hybrid benefit plans, including consumer-driven health plans, or CDHPs, hospital only and limited benefit products.

Our Commercial segment includes Local Group, National Accounts, UniCare and certain other business operations (dental, vision, life and disability and workers' compensation). Business units in the Commercial segment provide a broad array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management and other administrative services.

Our Consumer segment includes Senior, State-Sponsored and Individual business. Senior business includes services such as Medicare Part D, Medicare Advantage, and Medicare Supplement, while State-Sponsored includes our Medicaid business.

Our Other segment includes our Comprehensive Health Solutions Business unit that brings together our resources focused on optimizing the quality of health care and cost of care management. The Comprehensive Health Solutions Business unit includes provider relations, care and disease management, behavioral health,

employee assistance programs and our pharmacy benefit management, or PBM, business, which includes NextRx, and our specialty pharmacy, PrecisionRx Specialty Solutions. Our Other segment also includes results from our Federal Government Solutions, or FGS, business. Our FGS business includes the FEP and National Government Services, Inc., or NGS, which acts as a Medicare contractor in several regions across the nation. The Other segment also includes other businesses that do not meet the quantitative thresholds for an operating segment as defined in Statement of Financial Accounting Standards ("FAS") No. 131, Disclosures about Segments of an Enterprise and Related Information, as well as intersegment sales and expense eliminations and corporate expenses not allocated to the other reportable segments.

Our operating revenue consists of premiums, administrative fees and other revenue. Premium revenue comes from fully-insured contracts where we indemnify our policyholders against costs for covered health and life benefits. Administrative fees come from contracts where our customers are self-insured, or where the fee is based on either processing of transactions or a percent of network discount savings realized. Additionally, we earn administrative fee revenues from our Medicare processing business and from other health-related businesses, including disease management programs. Other revenue is principally generated from member co-payments and deductibles associated with the mail-order sale of drugs by our pharmacy benefit management companies.

Our benefit expense primarily includes costs of care for health services consumed by our members, such as outpatient care, inpatient hospital care, professional services (primarily physician care) and pharmacy benefit costs. All four components are affected both by unit costs and utilization rates. Unit costs include the cost of outpatient medical procedures per visit, inpatient hospital care per admission, physician fees per office visit and prescription drug prices. Utilization rates represent the volume of consumption of health services and typically vary with the age and health status of our members and their social and lifestyle choices, along with clinical protocols and medical practice patterns in each of our markets. A portion of benefit expense recognized in each reporting period consists of actuarial estimates of claims incurred but not yet paid by us. Any changes in these estimates are recorded in the period the need for such an adjustment arises. While we offer a diversified mix of managed care products, including PPO, HMO, POS and CDHP products, our aggregate cost of care can fluctuate based on a change in the overall mix of these products. Over the last few years, CDHP products have become more popular. CDHP products tend to have a lower benefit expense due to the benefit design of these products. It is possible the continued growth of CDHP products could influence our aggregate cost of care trends in future periods.

Our selling expense consists of external broker commission expenses and generally varies with premium volume. Our general and administrative expense consists of fixed and variable costs. Examples of fixed costs are depreciation, amortization and certain facilities expenses. Other costs are variable or discretionary in nature. Certain variable costs, such as premium taxes, vary directly with premium volume. Other variable costs, such as salaries and benefits, do not vary directly with changes in premium, but are more aligned with changes in membership. The acquisition or loss of a significant block of business would likely impact staffing levels, and thus associate compensation expense. Examples of discretionary costs include professional and consulting expenses and advertising. Other factors can impact our administrative cost structure, including systems efficiencies, inflation and changes in productivity.

Our cost of drugs consists of the amounts we pay to pharmaceutical companies for the drugs we sell via mail order through our PBM and specialty pharmacy companies. This amount excludes the cost of drugs related to affiliated health customers recorded in benefit expense. Our cost of drugs can be influenced by the volume of prescriptions at our PBM, as well as cost changes, driven by prices set by pharmaceutical companies and the mix of drugs sold.

Our results of operations depend in large part on our ability to accurately predict and effectively manage health care costs through effective contracting with providers of care to our members and our medical management programs. Several economic factors related to health care costs, such as regulatory mandates of

coverage and direct-to-consumer advertising by providers and pharmaceutical companies, have a direct impact on the volume of care consumed by our members. The potential effect of escalating health care costs as well as any changes in our ability to negotiate competitive rates with our providers may impose further risks on our ability to profitably underwrite our business, and may have a material impact on our results of operations.

During early 2008, we experienced higher than expected medical costs in several business lines, including less favorable than expected prior year reserve development. We also experienced lower than expected fully-insured enrollment, primarily due to declines in our National and Local Group membership, including UniCare, and Individual membership. Additionally, our results of operations were impacted by the changing economic environment. The impact of these factors on the results of operations is discussed throughout this MD&A. Certain of these impacts on medical costs may continue for the remainder of 2008. We continue to evaluate the long-term impact of these factors on our medical cost trend and overall results of operations.

This MD&A should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2007 and the MD&A included in our 2007 Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission, or SEC, and in conjunction with our unaudited consolidated financial statements and accompanying notes as of and for the three and six months ended June 30, 2008 included in this Quarterly Report on Form 10-Q. Results of operations, cost of care trends, investment yields and other measures for the three and six month periods ended June 30, 2008 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2008.

III. Significant Transactions

Stock Repurchase Program

We maintain a common stock repurchase program as authorized by our Board of Directors. Repurchases may be made from time to time at prevailing market prices, subject to certain restrictions on volume, pricing and timing. The repurchases are effected from time to time in the open market, through negotiated transactions and through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or Exchange Act. During the six months ended June 30, 2008, we repurchased and retired approximately 46.5 million shares at an average share price of $61.86, for an aggregate cost of $2,875.2 million. As of June 30, 2008, $1,423.2 million remained authorized for future repurchases. Subsequent to June 30, 2008, we repurchased and retired approximately 0.8 million shares for an aggregate cost of approximately $34.6 million, leaving approximately $1,388.6 million for authorized future repurchases at July 16, 2008. Our stock repurchase program is discretionary as we are under no obligation to repurchase shares. We repurchase shares under the program when we believe it is a prudent use of capital.

Our customer type definitions were revised in the first quarter of 2008 in accordance with our new organizational structure, as described above. Our medical membership includes seven different customer types: Local Group, Individual, National Accounts, BlueCard, Senior, State-Sponsored and FEP.

• Local Group consists of those employer customers with less than 1,000 employees eligible to participate as a member in one of our health plans, as well as customers with generally 1,000 or more eligible employees with less than 5% of eligible employees located outside of the headquarter's state. In addition, Local Group includes UniCare local group members.

• Individual consists of individual customers under age 65 (including UniCare) and their covered dependents.

• Beginning January 1, 2008, we revised our definition of National Accounts to correspond with our new organizational structure. National Accounts customers now are generally multi-state employer groups primarily headquartered in a WellPoint service area with 2,500 or more eligible employees, of which at least 5% are located outside of the headquarter's state. Some exceptions are allowed based on broker relationships. Service area is defined as the geographic area in which we are licensed to sell BCBS products. National Accounts will continue to manage existing accounts under the previous definition of 1,000 or more eligible employees, and the new definition will be applied on a prospective basis only with new sales.

• BlueCard host members represent enrollees of Blue Cross and/or Blue Shield plans not owned by WellPoint who receive health care services in our BCBSA licensed markets. BlueCard membership consists of estimated host members using the national BlueCard program. Host members are generally members who reside in or travel to a state in which a WellPoint subsidiary is the Blue Cross and/or Blue Shield licensee and who are covered under an employer-sponsored health plan issued by a non-WellPoint controlled BCBSA licensee (i.e., the "home" plan). We perform certain administrative functions for BlueCard members, for which we receive administrative fees from the BlueCard members' home plans. Other administrative functions, including maintenance of enrollment information and customer service, are performed by the home plan. Host members are computed using, among other things, the average number of BlueCard claims received per member per month.

• Senior members are Medicare-eligible individual members age 65 and over who have enrolled in Medicare Advantage, a managed care alternative for the Medicare program, or who have purchased Medicare Supplement benefit coverage.

• State-Sponsored membership represents eligible members with state sponsored managed care alternatives in Medicaid and State Children's Health Insurance programs.

• FEP members consist of United States government employees and their dependents within our geographic markets through our participation in the national contract between the BCBSA and the U.S. Office of Personnel Management.

In addition to reporting our medical membership by customer type, we report by funding arrangement according to the level of risk that we assume in the product contract. Our two funding arrangement categories are fully-insured and self-funded. Fully-insured products are products in which we indemnify our policyholders against costs for health benefits. Self-funded products are offered to customers, generally larger employers, who elect to retain most or all of the financial risk associated with their employees' health care costs. Some self-funded customers choose to purchase stop loss coverage to limit their retained risk.

The following table presents our medical membership by customer type, funding arrangement and reportable segment as of June 30, 2008 and 2007. Also included below are other businesses' key metrics, including prescription volume for our PBM companies and other membership by product. The medical membership and other businesses' metrics presented are unaudited and in certain instances include estimates of the number of members represented by each contract at the end of the period.

                                                       June 30
(In thousands)
Medical Membership                                  2008     20071        Change         % Change
Customer Type
Local Group                                         16,650   16,688          (38 )              0 %
Individual                                           2,353    2,450          (97 )             (4 )
National:
National Accounts                                    6,732    6,413          319                5
BlueCard                                             4,782    4,475          307                7

Total National                                      11,514   10,888          626                6
Senior                                               1,304    1,238           66                5
State-Sponsored                                      2,068    2,122          (54 )             (3 )
FEP                                                  1,385    1,381            4                0

Total Medical Membership by Customer Type           35,274   34,767          507                1

Funding Arrangement
Self-Funded                                         18,499   17,425        1,074                6
Fully-Insured                                       16,775   17,342         (567 )             (3 )

Total Medical Membership by Funding Arrangement     35,274   34,767          507                1

Reportable Segment
Commercial                                          28,414   27,868          546                2
Consumer                                             5,475    5,518          (43 )             (1 )
Other                                                1,385    1,381            4                0

Total Medical Membership by Reportable Segment      35,274   34,767          507                1

Other Membership
Behavioral Health                                   23,410   20,038        3,372               17
Life and Disability                                  5,553    5,754         (201 )             (3 )
Dental                                               4,665    5,169         (504 )            (10 )
Vision                                               2,574    2,480           94                4
Medicare Part D                                      1,854    1,594          260               16

PBM Prescription Volume Processed (Quarterly)2
Retail Scripts                                      98,296   90,882        7,414                8
Mail Order Scripts                                   6,834    7,022         (188 )             (3 )
Specialty Pharmacy Scripts                             230      150           80               53

Total Scripts                                      105,360   98,054        7,306                7


PBM Prescription Volume Paid (Quarterly)2
Retail Scripts                                      59,782   55,892        3,890                7 %
Mail Order Scripts                                   6,550    7,011         (461 )             (7 )
Specialty Pharmacy Scripts                             165       87           78               90

Total Scripts                                       66,497   62,990        3,507                6

1 Medical membership data for 2007 has been reclassified to conform to the 2008 presentation, except for the change in National Accounts membership definition, which is applied on a prospective basis.

2 Prescriptions processed represent all requests submitted to our PBM companies. Prescriptions processed may not ultimately agree to the amount paid for various reasons, including duplicative and non-covered submissions as well as situations where members do not pick up a filled prescription.

Medical Membership

During the twelve months ended June 30, 2008, total medical membership increased approximately 507,000, or 1%, primarily due to increases in our National Accounts, BlueCard, and Senior businesses partially offset by declines in Individual, State-Sponsored and Local Group membership.

Self-funded medical membership increased 1,074,000, or 6%, primarily due to an increase in self-funded National Accounts membership resulting from additional sales and BlueCard growth as well as the conversion of the Connecticut Medicaid program from fully-insured to self-funded. Fully-insured membership decreased by 567,000 members, or 3%, primarily due to ongoing conversions to self-funded arrangements, including the conversion of the Connecticut Medicaid program from fully-insured to self-funded, our exit from the Ohio CFC program and declines in fully-insured Local Group membership.

Local Group membership decreased 39,000 as increases in our BCBSA-branded business were offset by lapses, particularly in California due to small group renewal rate increases, and unfavorable in-group changes in our UniCare business.

Individual membership decreased 96,000, or 4%, primarily due to decreases in certain BCBSA-branded regions as well as in our UniCare business due to competitive pricing pressures, competitive broker compensation in certain regions and overall economic conditions.

National Accounts membership increased 319,000, or 5%, primarily driven by additional sales and in-group growth as employers are increasingly attracted to the benefits of our distinctive value proposition, which includes extensive and cost-effective provider networks and a broad and innovative product portfolio. These increases were partially offset by lapses in a small number of accounts.

BlueCard membership increased 307,000, or 7%, primarily due to increased sales by other BCBSA licensees to accounts with members who reside in or travel to our licensed areas.

Senior membership increased 66,000, or 5%, primarily due to additional sales of our Medicare Advantage product, partially offset by a slight decline in Medicare Supplement membership.

State-Sponsored membership decreased 54,000, or 3%, primarily due to our exit from the Ohio CFC program, offset by net growth in Connecticut primarily due to the withdrawal of two competitors.

Other Membership

Our Other products are often ancillary to our health business and can therefore be impacted by growth in our medical membership.

Behavioral health membership increased 3,372,000, or 17%, primarily due to the conversions of 2,402,000 members from a third-party vendor in January 2008 and growth in membership due to new sales of our behavioral health products.

Life and disability membership decreased 201,000, or 3%, primarily due to overall membership declines from a very competitive marketplace, reduction of members following employment declines at certain large customers and lapses due to the current economic environment.

Dental membership decreased 504,000, or 10%, primarily due to the loss of the dental component within one of our State-Sponsored plans in late 2007 as well as general losses due to the competitive environment.

Vision membership increased 94,000, or 4%, primarily due to continued market penetration of our Blue View vision product.

Medicare Part D membership increased 260,000, or 16%, primarily due to growth from new sales during the 2008 marketing period.

PBM Prescription Volume

Prescription volume for processed scripts in our PBM companies increased by 7,306,000, or 7%. Prescription volume for paid scripts in our PBM companies increased by 3,507,000, or 6%. Both processed and paid scripts increases were primarily due to an increase in retail scripts resulting from higher membership, partially offset by lower utilization of our mail order business. The lower . . .