(Adds comments on Medicare Advantage and exchanges)
By Caroline Humer
March 21 WellPoint Inc, the United
States' second largest insurer, on Friday said it expected to
add 1 million to 1.3 million members by the end of the year
partly due to growth on the new Obamacare exchanges.
WellPoint, which operates Blue Cross Blue Shield plans in 14
states, said because of that growth it now expects net income of
more than $8.20 per share, up from more than $8.00. That puts
its forecast closer to analysts' expectations for earnings of
$8.37 per share, according to Thomson Reuters I/B/E/S.
Shares were up 1.4 percent, or $1.43, at $101.25 in morning
trading on the New York Stock Exchange.
WellPoint Chief Executive Officer Joseph Swedish said during
an investor conference that the company is preparing for growth
during the next five years, when it expects to add 4 million new
members for a total of 40 million members by 2018.
Many of those will be from the exchanges, which were created
under the Affordable Care Act, often called Obamacare, to
provide insurance to individuals and offer subsidies based on
Swedish, who was appointed a year ago, also said the company
was targeting long-term earnings growth of 10 to 14 percent.
Swedish said that while the rollout of the public exchanges
had been lumpy, it had signed up 500,000 new members in January.
"It's clear that we have been a winner with respect to how that
has played out," he said.
WellPoint's president of its commercial business, Ken
Goulet, said that its new exchange customers' profiles looked as
expected, and that therefore the company believes it priced the
plan premiums correctly. Some national competitors have said the
population was older than it had expected and said they are
losing money on the business.
He said that age, predictive models on spending, and the
number of prescriptions for the new customers were showing that
the members are not sicker than it had forecast.
WellPoint is on target for enrollment after a very slow
start to sign-ups last fall due to the broken exchanges, he
"At the end of November we had triple-digit numbers across
all markets. But that grew substantially in December and has
been growing since," Goulet said.
The government recently said that it has signed up 5 million
people for health coverage through the exchanges, which sell
insurance with income-based subsidies to individuals. The
exchanges began selling insurance in October but were ridden
with technology problems that slowed sales in most states.
WellPoint Chief Financial Officer Wayne DeVeydt said that
based on numbers released in February by the Congressional
Budget Office, the health insurer could add 3 million members
through the public insurance exchanges by 2018.
DeVeydt said that the insurer could add 1.5 million new
members through the expansion of Medicaid for the poor. The
exchange growth represents $16 billion in revenue while the
growth in Medicaid health coverage for the poor would add $6
billion, he said.
WellPoint's head of government business, Richard Zoretic,
said that the company's Medicare Advantage business for seniors
should have operating results in 2014 that exceed 2013. But cuts
proposed for 2015 will push payments down as much as 5 percent
to 6 percent next year, he said, and that will hurt profit.
"In 2015 we expect margins to be pressured by reductions in
(government) reimbursements," Zoretic said. "The goal is to
mitigate the impact."
The government agency that oversees Medicare, the Centers
for Medicare and Medicaid Services, announced its proposal for
2015 plans last month and on April 7 will release the final
(Reporting by Caroline Humer; Editing by Stephen Powell)