Health Net shares tumble 25% as it posts loss, lowers forecast
Health Net Inc.shares plunged 25% as the Woodland Hills insurer posted disappointing first-quarter results and slashed its full-year profit outlook.
The company surprised analysts and investors by disclosing an additional $67 million in medical claims that hadn’t been reported in the fourth quarter because of errors in processing claims. Health Net said outside vendors that handle those claims for the company experienced problems with a new industrywide billing format.
Health Net also cut its 2012 profit forecast to a range of $2.35 to $2.50 a share, excluding certain items. In March, the company said it expected to earn $3.30 to $3.40 a share.
The unexpected news sent shares tumbling $9.06, or 25%, to $27.26 in trading Thursday. The stock hit a 52-week high of $41.22 last month.
Health Net Chief Executive Jay Gellert said the billing issues have been resolved and he vowed operations would improve.
“We now have to execute consistently through 2012 to regain your trust,” Gellert said in a conference call with analysts and investors.
The company reported a loss of $26.6 million, or 32 cents a share, in the quarter that ended March 31, compared with a loss of $108.2 million, or $1.16, a year earlier. Revenue in the quarter declined 16% to $2.83 billion from $3.36 billion, reflecting less money from government contracts.
Health Net has 3 million customers in private, Medicare and Medicaid health plans, with the bulk of those customers in California. Overall enrollment in those plans increased 1% in the quarter, hurt by the loss of three large employer accounts in California. The company also has 3 million members across 23 states through TriCare, the federal health plan for military members and their families.
The company has been expanding its presence in government health programs. Enrollment in its Medicare Advantage plans grew 8% and its Medicaid managed-care enrollment increased 10% from the same period last year.
Last month, California selected Health Net to participate in a key pilot program in Los Angeles and San Diego counties serving patients who are enrolled in both Medicare and Medicaid. Analysts have been bullish on Health Net and other insurers who are jockeying for government contracts across the country to serve those “dual-eligible” patients, who tend to have higher-than-average medical costs.
chad.terhune@latimes.com
