Despite a drop in year-over-year Q3 net income, health insurer WellPoint raised its earnings guidance for the rest of the year. Medicaid was a major growth engine for WellPoint, as more than 750,000 low-income beneficiaries were added to the insurer's rolls compared with the same period a year ago.
Third-quarter net income fell 4% to $630.9 million. But adjusted earnings per share hit $2.36, above Wall Street projections.
Indianapolis-based WellPoint, which will soon be renamed Anthem, said operating revenue in the quarter ended Sept. 30 rose 4.3% to $18.4 billion. The insurer added 2 million members year over year, mostly in its Medicaid business.
WellPoint is one of the largest Medicaid managed-care players, serving about 4.5 million people in 19 states. Ten of its states—California, Kentucky, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, New York, Washington and West Virginia—are expanding their Medicaid insurance eligibility under the Patient Protection and Affordable Care Act. WellPoint's 2012 acquisition of Amerigroup gave it a bigger Medicaid footprint.
WellPoint is also an active participant in the ACA's public exchanges, but exchange enrollment in the third quarter actually dipped from the second quarter of this year. On a call with investors, WellPoint CEO Joseph Swedish, formerly a health system executive, said the company had 751,000 exchange members, down from 769,000 that were recorded in the previous quarter.
Swedish didn't specifically say why they lost exchange members, other than they expected “some degree of churn.”
“We expect to be a net grower next year on our exchange book,” Swedish said. “I don't know that we'll maintain exactly the same market share because it is very much dependent upon the competitive environment.”
The insurer's total membership stood at 37.5 million people, up about 259,000 from the second quarter.
Like competitors UnitedHealth Group and Aetna, WellPoint saw tepid utilization of healthcare services from policyholders. The company's medical-loss ratio, or the percentage of premium dollars that go toward covering medical care, was 82.5% in the third quarter, down from 84.9% in the same period of 2013.
One of WellPoint's biggest moves in the third quarter involved its California subsidiary, Anthem Blue Cross. Anthem and seven competing health systems in Southern California said in September that they created a new HMO health plan, called Anthem Blue Cross Vivity, that will offer coverage to large employers starting next year. The health systems, which include UCLA Health and Cedars-Sinai Health System in Los Angeles, and Anthem will share in all profits or losses. The actual health plan is a narrow network that only includes the joint venture providers, but people who buy the coverage will have no deductibles or coinsurance.
“We believe this directly impacts our ability to compete in the market,” Swedish said on the call.
Follow Bob Herman on Twitter: @MHbherman
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