Despite falling revenue and enrollments, insurance giant WellPoint Inc. on Wednesday reported a 4% increase in profit for the second quarter.
The Indianapolis company, the nation's largest health insurer by membership, earned $722.4 million, or $1.71 a share, in the three-month period ended June 30, compared with $693.5 million, or $1.43, for the same period the previous year. For the first half of the year, earnings were up 26% over 2009.
WellPoint runs Blue Cross Blue Shield plans in 14 states and is the parent of Anthem Blue Cross of California, the state's largest for-profit health insurer.
Even as Chief Executive Angela F. Braly reported the rising earnings, she told analysts Wednesday that the company expected to suffer a loss in California this year because of trouble with contentious rate increases for individual policyholders.
WellPoint put rate increases of up to 39% on hold in March amid criticism by consumers, regulators and politicians, and then canceled the hikes in April after errors were uncovered in the paperwork accompanying them. The insurer has since filed for new premiums with a maximum increase of 20%.
"These rates have an average increase of 14%, but this will not cover our cost, and we currently project that we will lose money in California on our existing individual contracts this year," Braly said without giving a figure.
WellPoint executives have previously estimated the California losses at more than $100 million this year.
"While we made the decision to move forward with these revised rates, given the unique circumstances of the California individual market, this situation is not sustainable over the long term," Braly said Tuesday.
"WellPoint remains committed to serving individual members. However, in order to continue to serve customers, a carrier must be able to receive actuarially sound rates."
WellPoint's income rose in the second quarter as total revenue fell 6% to $14.5 billion from $15.4 billion during the same period in 2009. Enrollment fell to 33.5 million on June 30, compared with 34.2 million a year ago in part because of continued high unemployment, the company said.
WellPoint executives attributed the rising income to investment gains and the development of higher-than-expected reserves, among other factors.
"Our quarterly results exceeded our expectations," Braly said.
The company raised its profit forecast to $6.30 a share from $6.
Two WellPoint competitors have also reported rising profits. On Tuesday, Aetna Inc. said it realized a 42% jump in second-quarter earnings. UnitedHealth Group said last week that its net income rose 31% in the second quarter.
WellPoint shares fell $1.97 to $50.83 Wednesday.