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Healthcare overhaul ramps up business at WellPoint

WellPoint raises earnings forecast
WellPoint expects earnings growth in 2015, and CEO Joseph Swedish said the company is weighing larger dividends.
(Michael Conroy, Associated Press)

WellPoint Inc. raised its 2014 earnings forecast again and trumped third-quarter expectations as the overhaul of the healthcare system adds millions of people to the nation’s health insurance rolls, and at a lower cost than was expected at the nation’s second-largest health insurer.

The Blue Cross-Blue Shield insurer expects earnings growth in 2015 as well, and CEO Joseph Swedish said the company is weighing larger dividends.

WellPoint now expects 2014 adjusted earnings to range between $8.75 and $8.85 per share. That’s up from a forecast it made in July for earnings of more than $8.60 per share.

The new forecast marks the third time this year that WellPoint has raised its outlook.

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Analysts had been looking for annual per-share earnings of $8.74 per share, according to FactSet.

WellPoint also posted adjusted earnings of $2.36 a share in the third quarter, which was much better than the $2.28 that analysts had projected, according to a poll by Zacks Investment Research.

The Indianapolis insurer’s big quarter comes after competitors Aetna Inc. and UnitedHealth Group Inc. also topped quarterly expectations and raised their annual forecasts.

Insurers began the year cautious about a major coverage expansion initiated by the overhaul, the federal law that aims to cover millions of uninsured people. Late last year, the U.S. introduced state-based public health insurance exchanges that promised to give insurers millions of new customers by making it easier for people to buy coverage, sometimes with help from income-based tax credits.

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But the overhaul also heaped additional costs onto the balance sheets of insurers, including an industrywide tax that is non-deductible. It trimmed funding for Medicare Advantage plans and altered the manner in which insurers operate by preventing them from excluding high-risk patients.

Insurers were plunged into new territory, unsure of what their exchange customer base would look like, and a glitch-plagued debut of the exchanges created even more ambiguity.

A year later, these challenges appear manageable, and investors see much less uncertainty ahead for health insurers.

WellPoint said it has added 751,000 customers from the public exchanges, and they have turned out to be less expensive than initially anticipated. The insurer also has added enrollment through Medicaid expansion. The state-federal program for the poor and the elderly is expanding under the overhaul, and WellPoint also has entered new markets.

WellPoint shares rose $2.20, or 1.8%, to $122.20.


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