November 5, 2014 / 6:01 PM / 4 years ago

WellCare Health profit beats as memberships rise 43 percent

(Reuters) - U.S. health insurer WellCare Health Plans Inc (WCG.N) reported a better-than-expected adjusted profit for the third quarter, driven by a 43 percent increase in memberships under Obamacare.

WellCare’s shares rose 6 percent after it also raised its adjusted profit forecast for the full year.

Members under the Medicaid health plans increased 28 percent to 2.3 million in the quarter ended Sept. 30, driven by additions in Florida, Kentucky and Georgia under the federal health insurance program for lower-income people, Wellcare said.

Medicaid expansion has also helped other insurers such as UnitedHealth Group Inc (UNH.N), Centene Corp (CNC.N) and Cigna Corp (CI.N).

Obamacare, officially known as the Affordable Care Act, is estimated to have brought in more than 10 million people under insurance coverage through the creation of health exchanges and the expansion of Medicaid.

Under the Medicaid expansion program, states are provided with additional funding to cover adults aged 19-65 who earn up to 138 percent of the poverty level.

A clear Republican win in the mid-term elections on Tuesday is not expected to have much effect on Obamacare, analysts said.

Leerink Research analyst Anagha Gupte said the re-election of Republican Governor Nathan Deal in Georgia increases the likelihood of WellCare re-procuring the state Medicaid contract.

WellCare, which cut its full-year forecast by half to $2.20-$2.50 in July, said it expects adjusted net earnings of 60-70 cents per share in the current quarter. Analysts on average were expecting 70 cents, according to Thomson Reuters I/B/E/S.

The company said it now expects to earn $1.37-$1.47 in the second half, compared to $1.14-$1.44 per share it forecast in July.

“After cutting guidance significantly in the second quarter, there were fears of another big guidance reduction in the third quarter, but that didn’t materialize,” Citi analyst Carl McDonald wrote in a note.

WellCare said it expects to pay about $100 million more in 2015 towards a tax introduced by Obamacare, calling it a substantial “headwind”.

Leerink’s Gupte told Reuters she “fully expected” WellCare to get reimbursed for this tax through agreements made with states where the company operates.

WellCare’s net profit fell about 60 percent to $19.3 million, or 44 cents per share, in the third quarter due to a delay in tax reimbursement.

Excluding items, net profit was 77 cents per share, above average analyst estimate of 69 cents.

Premium revenue rose 35 percent to $3.3 billion, beating estimate of $3.28 billion.

WellCare’s medical benefit expenses rose 40 percent to $3 billion primarily due to the growth in Medicaid programs in Florida and Kentucky as well as membership gain through a recent acquisition in New Jersey.

Editing by Don Sebastian

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