has signed up roughly 500,000 new customers since the state and federal exchanges
opened for business on Oct. 1. That accounts for more than 15% of the roughly 3 million individuals who have acquired coverage through the fledgling marketplaces.
Roughly 80% of WellPoint's enrollments were new customers, although it remains unclear how many were previously uninsured. About two-thirds of the company's new clients qualified for federal subsidies that are available for individuals with incomes up to 400% of the federal poverty threshold.
WellPoint officials offered the most thorough breakdown of exchange enrollments to date on a call with investors Wednesday morning to detail 2013 financial results
. The Indianapolis-based, publicly traded company, which is affiliated with the Blue Cross and Blue Shield Association
, is selling products through the exchanges in all 14 states where it does non-governmental business.
While there have been widespread concerns about the dearth of young people signing up for coverage through the exchanges—and the potential for that to destabilize the risk pool—WellPoint CEO Joseph Swedish indicated that the emerging customer base is in line with expectations.
“While it is early, we are encouraged by the level of applications we've received and the indicators that profile our risk pool,” Swedish said. “We believe our strategy and investment for exchanges, which are based on proprietary research and data-driven processes, are serving us well.”
WellPoint's enrollment figures are through last week and include some individuals who have not made their first premium payments. Customers have until the end of the month to pay their initial bill for coverage effective Jan. 1.
Despite the rosy assessment, the turbulence of the exchange rollouts took a bite out of WellPoint's profitability in the fourth quarter of 2013. The company's quarterly earnings of $148.2 million were down 68% compared to the previous year. That reflected a one-time loss of $164.5 million stemming from the sale of 1-800 CONTACTS and related assets last month. But profits also were blunted by increased medical costs, company officials said, as customers rushed to take advantage of coverage amid the uncertainty caused by tens of thousands of canceled plans. WellPoint spent 87.8% of revenues on medical costs in the fourth quarter, up from 87.3% in the comparable period during 2012.
“We believe this uptick, year over year in the individual market, was prompted by some members seeking service prior to the potential changes in coverage in 2014,” Swedish said.
Profits will continue to be negatively affected by the bungled exchange rollouts in 2014. WellPoint officials estimate that regulatory changes announced by the Obama administration—including the decision
to allow individuals whose plans were canceled to be exempt from the individual mandate—will cost the company $100 million this year.
WellPoint's profits for 2013 totaled $2.5 billion, amounting to $8.20 per share. That was down modestly from 2012, when earnings reached $2.7 billion.
Revenues reached $70.2 billion in 2013, an increase of 16%. That was largely due to the $4.5 billion acquisition of Amerigroup Corp., which was completed in December 2012. That transaction bolstered WellPoint's presence in the Medicaid and Medicare markets. Government programs now account for 45% of the company's revenues, according to Swedish, up from 36% in 2012.
At the close of 2013, WellPoint had 35.7 million customers, a decrease of 1.3% compared to 2012. Commercial business was down by 234,000, while government enrollees dropped by 250,000.
Investors were initially buoyed by WellPoint's report. The company's stock price was up almost 2% as of noon Wednesday. During the past 12 months, WellPoint's stock has risen more than 30%. Company officials anticipate that 2014 profits will remain above $8 per share.
“The changes that are facing our industry are admittedly very substantial,” Swedish said. “It still remains very early in the year, so we're trying to be realistic about all these moving parts and how they're coming together.”Follow Paul Demko on Twitter: @MHpdemko