INDIANAPOLIS – WellPoint Inc.’s third-quarter earnings fell 5 per cent but still topped expectations, and the nation’s second-largest health insurer said it raised its 2013 forecast despite added expenses from the health care overhaul.
The Blue Cross Blue Shield insurer said Wednesday its performance so far this year helped prompt it to raise its expectation for 2013 adjusted earnings to at least $8.40 per share. That’s up from its previous forecast for at least $8 per share and well beyond the $8.26 per share average that analysts surveyed by FactSet expect.
Company executives told analysts they are doing this despite making sizeable investments to get ready for upcoming coverage expansions under the overhaul.
The law aims to provide health insurance coverage to millions of uninsured people, and it took a major step toward that goal on Oct. 1, when enrolment started for coverage that begins in January. The overhaul calls for an expansion of the state-federal Medicaid program and also provides income-based tax credits to help people buy coverage on health insurance exchanges that are set up in each state.
WellPoint is selling coverage on several of these exchanges. Chief Financial Officer Wayne DeVeydt said WellPoint has spent about $300 million to prepare for the exchanges, and they expect to spend another $70 million to $100 million on marketing for coverage the insurer sells on them.
The overhaul’s coverage expansion will affect WellPoint more than other insurers because the company derives a large portion of its business from the individual market and through smaller employers who cover their workers. Investors haven’t been sure how much of this business WellPoint will lose or gain because of these exchanges.
They’ll have to wait for clarity on that. Computer glitches tied to the largely online exchanges have frustrated consumers in many states as they have tried to shop around for coverage.
DeVeydt said the insurer has enrolled people through the exchanges, but they don’t have a clear picture yet on how many because they haven’t received all the paperwork for those customers.
He added that there’s still too much uncertainty over how the overhaul will affect WellPoint’s business to offer insight into the company’s expectations for 2014, other than to say that the company wants to forecast earnings of more than $8 per share. The insurer will provide a more specific forecast in January, when it reports fourth-quarter results.
Overall, WellPoint said it earned $656.2 million, or $2.16 per share, in the third quarter. That compares to $691.2 million, or $2.15 per share, last year, when the company had more shares outstanding. Earnings excluding one-time items totalled $2.10 per share.
Analysts expected, on average, earnings of $1.81 per share, according to FactSet.
Revenue excluding investment gains or losses soared 17 per cent to $17.73 billion and topped analyst expectations for $17.66 billion.
Enrolment gains from the acquisition of Medicaid coverage provider Amerigroup helped fuel the revenue growth. But that enrolment also drove medical costs higher.
WellPoint shares fell 2.8 per cent, or $2.43, to $86 in afternoon trading Wednesday.
Morningstar analyst Vishnu Lekraj said the lack of certainty about 2014 likely prompted some investors to sell their shares Wednesday.