The Blue Cross Blue Shield insurer closed its $4.46 billion acquisition of Medicaid coverage provider Amerigroup Corp. late last year, and the acquisition added more than 2 million members to its enrollment in the first quarter. That helped boost the insurer's total membership more than 6% in the first quarter to 35.8 million people, a total that trails only UnitedHealth Group Inc.
Medicaid is the state-federal program that provides health coverage for the needy and disabled people, and it represents a growth opportunity for health insurers. States are starting to move residents who qualify for both Medicaid and Medicare, which is a federally-funded program for people over age 65 and the disabled, into managed care programs that improve their care and cut wasteful spending.
WellPoint officials have said the opportunity these "dual eligible" patients offer was a driving force behind the deal.
Many of these patients have chronic or expensive medical conditions, so the additional membership comes with high costs that can balance the extra revenue. WellPoint's benefit expense, or the total it paid in claims, climbed nearly 17% to $13.75 billion in the quarter.
Overall, the insurer said Wednesday it earned $885.2 million, or $2.89 per share, in the three months that ended March 31. That's up from $856.5 million, or $2.53 per share, a year ago, when the company had more shares outstanding.
Adjusted earnings totaled $2.94 per share. Analysts forecast earnings of $2.38 per share, according to FactSet.
Operating revenue jumped nearly 16% to $17.55 billion. Analysts expected higher revenue of $17.86 billion.
WellPoint now expects 2013 earnings of at least $7.80 per share, up from the $7.60 per share it forecast in January.
Analysts expect, on average, earnings of $7.82 per share.
WellPoint runs Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio. Its stock fell 8% last year, as earnings slipped and costs climbed. Former CEO Angela Braly resigned last August after the insurer cut its 2012 forecast and as investor frustration started to surface over the company's performance.
The company then beat analyst expectations in the year's last two quarters, as earnings rose.
BMO Capital Markets analyst Jennifer Lynch said in research note she thinks the company is making progress with its turnaround, given that it beat expectations in the first quarter and raised its annual forecast.
WellPoint named veteran hospital executive Joseph Swedish as its next CEO in February, and he started with the insurer last month. The company's share price has climbed nearly 14% so far this year as of Tuesday's close.
The shares gained an additional $1.67, or 2.4%, to $71 about 30 minutes before the market opening.