WellPoint Earnings to Fall 7% in 2013, But…

January 23, 2013

WellPoint Inc. (Indianapolis) projects earnings of at least $7.60 per share in 2013, down about 7% from last year.  But it’s really not all that bad. 

Company officials said on a conference call with Wall Street analysts today that the forecast is actually in keeping with earlier expectations that profits would be modestly up in 2013. 

The logic goes like this: WellPoint had originally expected 2012 earnings of about $7.35 per share.  Earnings actually came in at $8.18 per share because of better-than-expected fourth-quarter results.  So the 2013 forecast of $7.60 is up modestly compared to the original $7.35 projection, which is no longer operative.

I suppose it’s wrong to penalize a company for doing better than expected.  Investors seem to agree, pushing shares in WellPoint up 1% in morning trading on the strong fourth-quarter results.

In general, WellPoint officials said premium pricing remains rational, even as cost trends are expected to accelerate in 2013.   The company also expects to shed nearly 2% of its medical membership as it tightens pricing.

All of which is well and good.  But in general the results still bolster the view that 2013 will be a year of tightening margins for the managed care industry.


Outlook for Managed Care 2013: Margin Squeeze

January 22, 2013

I always feel like I’m late to the party–or hangover (to mix metaphors)–when it comes to projecting health plan profits.  Like many industry observers I had expected 2012 to be a decent year; instead, it was so-so at best. 

On to 2013.  Our recently released Outlook for Managed Care report is calling for yet another so-so year.  So that must mean things are going to improve, right? 

While underwriting cycles are notoriously difficult to predict, several independent data sources suggest the potential for tighter margins as the spread between premiums and medical costs narrow.  One major plan–UnitedHealth–expects 2013 earnings growth of less than 2%.  Another–WellPoint–expects profits to be about flat.

In short, I’m not saying things are going to get worse for health plans in 2013.  But I’m not saying they’re going to get better either.

UnitedHealth Gets 10% of Profits from Individual, Small Group

January 18, 2013

UnitedHealth said yesterday that individual and small group accounts for only 10% of company earnings per share–indicating fairly limited exposure when these segments migrate to health insurance exchanges in 2014. 

UnitedHealth chief executive Steven Hemsley revealed the figure during a conference call with Wall Street analysts, adding that individual and small group profit margins are comparable to the company’s overall commercial health insurance business.

Hemsley also indicated UnitedHealth will likely participate in 10 to 25 exchanges; however, he added the company isn’t committed to any particular level of participation and will remain flexible.

We will only participate in exchanges that we assess to be fair, commercially sustainable and provide a reasonable return on the capital they will require. And like Medicaid, if we are in a situation or market dynamic that we do not see as sustainable, we will either not participate in the first instance or ultimately withdraw.

UnitedHealth reiterated that earning growth will slow in 2013 to under 2%, compared to a 12% gain in 2012.

Profits Down at 21 Not-for-Profit Plans

January 17, 2013

A CRG tally of 21 leading not-for-profit health plans shows combined net income fell 14% through six months of 2012.  We did a separate tally of financial data for nearly 200 HMOs in 12 states (for-profits and not-for-profits), which shows combined net income fell 15% through six months of 2012.  Maybe the underwriting downcycle some predict for 2013 already began in 2012.

Coops Even Less of a Factor

January 10, 2013

It was hard to imagine that healthcare coops proposed by ObamaCare would be much of a substitute for a public option or much competition to health insurers.  With federal funding slashed as part of the fiscal cliff bargain, they will be even less of a factor.

Medicare Advantage Continues to Grow

January 8, 2013

As expected, Medicare Advantage plans ended 2012 with nearly 13.4 million members, up 10% from 12.2 million in 2011.  The resiliency of the program continues to amaze me. 

Correction (1-9-13): Prior version showed incorrect years.


On Selling Health Insurance Across State Lines…

January 5, 2013

Carl McDonald of Citi offers the following:

A core Republican principle in the health care world said that one way to fix the system and reduce premiums is to allow insurers to sell products across state lines, so that plans aren’t subject to all the mandates and other items a particular state requires. As we’ve noted over the years, this is one of those things that sounds good in theory, but doesn’t make much sense in the real world. The problem is that while I may love a product sold by Blue Cross Blue Shield of Iowa, I happen to live in Boston. And Blue Cross of Iowa doesn’t have a network or any discounts negotiated with doctors and hospitals in Boston. So while the Blue plan from Iowa would get some relief from not offering every mandate required of insurers in Massachusetts, that’s a drop in the bucket compared to the advantages the local insurers have on the rates they pay to providers. There’s no way Blue Cross of Iowa could offer a remotely competitive product in Massachusetts without those discounts. So it’s been amusing to read some of the articles lately about the shock and utter disbelief some states have had after passing laws to allow insurance sales across state lines. Last year, for example, Georgia passed a law allowing interstate health insurance products. Since then, not a single insurer has asked permission to sell a product that the new law allows. It kind of reminds us of all the hoopla over eliminating the exemption health insurers had from federal anti-trust laws. In theory, it sounded great that eliminating that exemption would improve competition and lower premiums, but in reality, the exemption had no practical impact, and eliminating it wouldn’t change a thing…

I couldn’t have said it better myself. 

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