(Refocuses on exchanges)
By Caroline Humer
April 30 WellPoint Inc on Wednesday said
that its Obamacare exchange business was sustainable so far,
echoing comments from another major insurer last week that these
new customers have cost as much as expected, not more.
The report lifted shares in WellPoint, the second-largest
U.S. health insurer, by about 5 percent and gave its next
largest competitor Aetna Inc a 1.5 percent increase as
it eased some investor concerns about the profitability of this
"They are saying that there were no issues in the exchange
experience so far. They are growing gang busters if you will.
Even if there were any issues that manifested themselves going
forward, they have very strong reserves and good overall
results," Leerink Partners analyst Ana Gupte said.
The exchanges, created under President Barack Obama's
healthcare reform law, have sold new health plans to more than 8
million people. Insurers, and critics, have worried about the
health of these new customers and whether the business will be a
drain on insurers and U.S. taxpayers.
WellPoint is selling individual policies on the new
exchanges in the 14 states where it operates Blue Cross Blue
Shield plans. It has the most total customers on the exchanges,
about 150,000 more than Aetna, which is in 17 states.
WellPoint said it added 400,000 new customers during the
quarter and expects a total of 600,000 this year after it
accounts for all enrollees, including those who signed up after
a Feb. 15 cut-off for March 1 coverage.
The business is "in the green", with profit margins of 3 to
5 percent, its top finance executive said.
The age and general characteristics of the customers as well
as the type of insurance coverage they have purchased were in
line with the premium prices it set, WellPoint said, similar to
the experience Aetna Inc described last week.
WellPoint Chief Financial Officer Wayne DeVeydt cautioned he
wants to see the remaining enrollments in the second quarter
before declaring a win.
"I want to make sure that converts before we officially say
that we've got it all right, but it's very encouraging right
now," DeVeydt said.
The results underscored the company's improved outlook for
2014, which it raised by about 20 cents per share to at least
$8.40 per share, excluding items.
WellPoint's comments were more positive than Aetna's, which
said that pricing had been in line with customer demographics
but that ultimately it continued to see the business as a
"headwind" for 2014 results.
Like Aetna, WellPoint also said it is keeping an eye on the
costs of the pricey new hepatitis C treatments, which cost $50
million in the first quarter alone. It has built in $100 million
in additional hepatitis C drug costs for 2014, the company said.
Gilead Sciences' new treatment Sovaldi broke sales
launch records during the first quarter with its $84,000 price
tag. An estimated 3.2 million Americans have this virus that can
cause liver wasting disease and for the first time, this drug
promises many of them a cure.
NET PROFIT FALLS
Net profit fell during the quarter, largely because of
investment spending related to healthcare reform and higher
administrative costs of adding new commercial customers.
WellPoint, which runs Anthem and Empire Blue Cross Blue
Shield plans, reported net income of $701 million, or $2.40 per
share, down from $885 million, or $2.89 per share, a year
Excluding net gains on investments, WellPoint's profit was
$2.30 per share. Analysts on average had expected $2.12,
according to Thomson Reuters I/B/E/S.
The company said it had spent less on medical claims than
expected, partly due to bad weather. Taxes were also lower than
expected, while overall costs remained constrained.
The company added 1.2 million members in its commercial
business, which includes large national employers, local
employers and the individual markets.
(Reporting by Caroline Humer; Editing by Lisa Von Ahn, Chizu
Nomiyama and Sofina Mirza-Reid)