* Medical costs drop with lower consumer use
* Raises outlook for 2013
* CEO Swedish to attend White House meeting later Wednesday
By Caroline Humer
Oct 23 Health insurer WellPoint Inc on
Wednesday said it was not ready to provide profit forecasts for
2014, citing problems launching new insurance plans under
President Barack Obama's healthcare reform, sending shares
WellPoint is one of the leading insurers offering health
plans on the state-based exchanges created under Obamacare to
provide coverage for millions of Americans.
The exchanges launched on Oct. 1 and the enrollment effort
has been stymied by technical problems on the federal
government's Healthcare.gov website serving 36 states. That has
raised concerns that consumers will not be able to sign up in
time to get coverage starting on Jan. 1.
WellPoint does not yet have an accurate picture of
enrollment in these exchanges, Chief Executive Officer Joseph
Swedish said during a conference call. WellPoint has signed up
new members in these plans, but the company declined to give
The White House was due to convene a meeting with leading
insurance company CEOs, including Swedish, later on
Shares in WellPoint, which operates 14 Blue Cross Blue
Shield licenses, fell 3 percent. Rivals Aetna Inc and
UnitedHealth dropped 2.3 percent and 0.8 percent.
"We remain optimistic about the long-term membership growth
opportunities on the exchanges, but given that we are just three
weeks into the open enrollment period, it is really too early to
draw any definitive conclusions," Swedish said during a call
Chief Financial Officer Wayne DeVeydt said that the company
still must determine how many current customers will migrate to
the exchanges and how much it will need to spend to support the
plans there to gauge its 2014 performance.
One analyst said shares were off because the company was
being so cautious about the outlook for next year.
Morningstar senior analyst Vishnu Lekraj said the Obamacare
launch "has been rocky to say the least," leaving many questions
about how the implementation of them will unroll and what the
affect on insurance plan premiums will be in the longer run.
PROFIT BEATS EXPECTATIONS
Fourteen U.S. states are operating their own Obamacare
exchanges, and the federal government is operating them for the
other 36 states. WellPoint is selling plans on both types of
Since the Oct. 1 launch, technology problems have prevented
millions of people from logging onto the government site to buy
plans, pushing them to phone and paper applications. Enrollment
for 2014 is open until the end of March.
WellPoint said its third-quarter net income fell to $656.2
million, or $2.16 per share, from $691.2 million, or $2.15 per
share, a year earlier as costs rose due to investments for
growth opportunities and increased compensation.
Earnings came to $2.10 per share, excluding favorable tax
benefits and net investment gains, up from $2.09 a year earlier.
Analysts on average were expecting a profit of $1.82 per share,
according to Thomson Reuters I/B/E/S.
For 2013, the company raised its 2013 membership and profit
forecasts to reflect the stronger-than-expected third quarter
performance. It now expects 2013 earnings of at least $8.40 per
share. Analysts had forecast $8.27.
WellPoint said it had 35.5 million members at the end of
September, an increase of 2 million from a year earlier. Its
Medicaid enrollment increased by 2.4 million members due to the
acquisition of Amerigroup, while its commercial and Medicare
businesses declined. It expects to end the year with 35.6
million people enrolled in medical plans.
The company said it had spent 84.9 percent of its premium
income on providing healthcare, down from 85.4 percent a year
WellPoint said unit cost increases and use of medical
services were lower than anticipated during the first nine
months of this year. Use of medical services, including
hospitalizations, doctor visits and elective surgery, has been
down in recent years because of the weak economy and as health
plans have shifted more of the cost to consumers.
The report comes one week after results from UnitedHealth,
whose 2014 outlook for the private Medicare business was
perceived negatively by investors and drove down shares of
WellPoint, Cigna Corp, Aetna, and Humana Inc.