WellPoint Sees 3%-5% Rate Hike in State in ’98

WellPoint Health Networks Inc. expects to raise health-insurance rates in California by 3% to 5% this year, the company’s chief executive said Wednesday. U.S. health-care costs have remained constant for two years at about 13.6% of gross domestic product, WellPoint Chairman and Chief Executive Leonard Schaeffer said.

“Employers realize they have had below-average health inflation, so they’re just a bit more flexible,” he said.

The company expects its costs in California, its largest market, to rise 3% to 5% this year, he said. Schaeffer forecast that the company will raise rates in other U.S. markets by 7% to 10%, while costs will grow 6% to 8%.

He made the comments after the company said Tuesday that fourth-quarter profit from operations rose 25% as the managed-care company increased its membership, raised prices and cut costs. Profit before charges rose to $58.6 million, or 83 cents a diluted share, compared with net income of $47.0 million, or 71 cents, a year earlier. That beat the 80 cents a share average estimate of analysts polled by IBES International Inc.

Chief Financial Officer David Colby told the Bloomberg Forum he’s comfortable with analyst estimates that the company this year will earn about $3.62 a diluted share, the consensus of analysts surveyed by IBES International Inc.

Schaeffer said the company is looking to grow through acquisitions after buying health plans from Massachusetts Mutual Life Insurance Co. and John Hancock Mutual Life Insurance Co.

“Should other opportunities . . . come along, we will be making acquisitions in the strategic locations we have identified outside of California,” he said. Those areas include Texas, Georgia, Illinois, Ohio, Indiana, Virginia, New York, New Jersey and Connecticut.

WellPoint shares rose $1.88 to close at $59.19 on the New York Stock Exchange.