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WellPoint earnings drop 8%; insurer seeks Medicare growth

April 25, 2012|By Chad Terhune
  • WellPoint, parent of Anthem Blue Cross in California, posted a decline in first-quarter profit.
WellPoint, parent of Anthem Blue Cross in California, posted a decline… (Darron Cummings / Associated…)

Health insurance giant WellPoint Inc. reported an 8% drop in first-quarter profit, reflecting lower membership and higher costs.

The nation’s second-largest health insurer, after UnitedHealth Group Inc., runs Anthem Blue Cross in California and plans in 13 other states. It reported net income of $856.5 million, or $2.53 a share, for the three months ended March 31, compared to net of $926.6 million, or $2.44 a share, a year ago. Revenue grew 4% to $15.42 billion in the quarter.

The results topped analysts’ expectations for adjusted earnings of $2.27 a share. WellPoint boosted its full-year profit forecast to at least $7.84 a share, including net investment gains. Shares of WellPoint were down slightly in afternoon trading.

Overall enrollment for the Indianapolis-based company dipped 2% to 33.7 million since the end of last year. Last week, UnitedHealth reported a 3% enrollment increase to 35.6 million over the same period.

WellPoint said its costs for medical claims climbed 5% to $11.77 billion in the quarter. Like other insurers, WellPoint attributed most of that increase to higher prices for medical care. Its medical loss ratio, which measures the portion of insurance premiums that go toward patient care, edged up to 83.3% from 82.1% a year ago.

In recent quarters, most health insurers have been recording robust profits as patients pulled back on medical care in a sluggish economy. However, WellPoint had struggled with higher-than-expected claims from a Medicare plan in Northern California last year, which hurt earnings and rattled investor confidence in the company.

WellPoint exited that market and said it continued to gain traction in its Medicare business overall, adding 165,000 seniors during the first quarter. Last year, it acquired CareMore Health Group, which runs Medicare plans that specialize in helping seniors with higher medical needs.

On a conference call with analysts and investors, Angela Braly, WellPoint’s chief executive, said the company has 29 CareMore clinics in California, Nevada and Arizona and has plans to add 12 more this year. She said the company is looking forward to participating in a government program in Los Angeles aimed at providing better care at lower costs for patients enrolled in both Medicare and Medicaid.

“Our senior business has underperformed in recent years,” Braly said.

The nation’s largest insurers have been diversifying into new businesses as growth slows in their conventional employer-based market. They have been acquiring clinics and large physician groups and building up their consulting services to medical providers on billing and technology.

Insurers also face uncertainty as the U.S. Supreme Court prepares to rule on the constitutionality of the federal healthcare law in June and whether the mandate for consumers to purchase health coverage remains intact. “Right now, we are operating as if the Affordable Care Act is the law of the land,” Braly said on the conference call.

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