Health insurance giant WellPoint Inc., which runs Anthem Blue Cross in… (Michael Conroy / Associated…)
Insurance giant WellPoint Inc. reported a 3% increase in first-quarter profit and raised its full-year outlook as the company prepares for major changes under the federal healthcare overhaul.
WellPoint, which runs Anthem Blue Cross in California and health plans in 13 other states, said its results were lifted by a recent acquisition that helped boost enrollment of the nation's second-largest health insurer to nearly 36 million people.
Investors cheered the results, bidding up WellPoint's shares $4, or 5.8%, to $73.33 in trading Wednesday.
Joseph Swedish, a veteran hospital executive who took over as WellPoint's chief executive last month, is looking to maintain the company's recent momentum as it confronts new challenges under the federal healthcare law starting next year.
"As I look ahead at the coming marketplace changes, there will be challenges and opportunities, and I believe we will be successful in helping to enhance healthcare quality and affordability across our markets," Swedish said.
Carl McDonald, a healthcare analyst at Citigroup, said WellPoint has more at stake in the healthcare overhaul than most other major insurers given its sizable market share among individuals and small businesses.
WellPoint "has the most to fear from health reform in 2014, with an estimated 25% of earnings attributable to individual and small group products," McDonald said Wednesday in a note to investors.
California's state-run health insurance exchange, Covered California, is reviewing confidential bids from health insurers now and is expected to select only certain companies by region across the state. California will announce the winning bidders in the coming weeks.
"Unlike most states, California will pick a limited number of plans to participate, creating an outlier situation if WellPoint were denied entrance to the market," McDonald said.
WellPoint said its first-quarter net income was $885 million, or $2.89 a share, compared with $857 million, or $2.53 a share, a year earlier. Those results topped Wall Street's expectations.
Revenue in the quarter that ended March 31 climbed 16% to $17.6 billion. Analysts also noted that the company's medical costs came in lower than expected.
WellPoint recorded a boost from its recent acquisition of Amerigroup Corp., a Medicaid insurer. WellPoint said total enrollment rose 6% to 35.8 million members, second only to rival UnitedHealth Group Inc.
The company said it expects 2013 earnings of at least $7.80 a share, up from its previous forecast of $7.60 a share.