Spurred by lower-than-expected medical costs, a medical enrollment increase of 875,000 and decreased administrative expenses, WellPoint announced first quarter 2011 earnings of $2.44 per share, an increase of 21 percent compared to 2010 first quarter earnings.
"At our February investor conference we (said) that 2011 would be a rebasing year from which we expected to grown," said Angela Braly, chairman, president and CEO of WellPoint. "We now believe that our full-year 2011 results will better than we originally anticipated."
As a result, the company has revised many of its earlier projections for 2011. The company now anticipates 33.9 million members by the end of the 2011, a net increase of 100,000 members from current levels. It also raised its earning guidance for 2011 to at least $6.70 per share, an increase of $0.40 from previous projections.
[See also: WellPoint profits rise after decline in use of services]
The growth in medical enrollment represents a 3 percent increase from the end of 2010. Approximately one-third of that growth was attributed to increases due to the change of dependent coverage allowing parents to include children up to the age of 26 on family health insurance plans.
The segment that saw the largest increase was WellPoint's national business, which increased by 727,000 members.
"We are pleased by the growth in our national business which continues to be driven by our compelling value proposition of broad cost-effective provider networks," said Braly.
While medical cost trend was lower than anticipated in the company's commercial business and contributed to the jump in earnings, company officials anticipate that underlying medical costs in the local group business will be roughly 7.5 percent for 2011.
And while the rolling 12-month medical costs fell below this range, the company is holding firm to its projections, which are reflected both in its pricing and revised guidance.
Wayne DeVeydt, executive vice president and CFO, noted that the company has been aggressive in its approach to negotiating prices with providers and cited cost reductions negotiated with five California hospitals that had costs 70 percent to 100 percent higher than the state average.
"We will continue our emphasis on contracting in 2011 to enhance affordability for our members," DeVeydt said.
WellPoint also saw increases in its senior products representing its Medicare Advantage plans, which gained 73,000 members, augmented by smaller increases in its FEP, state-sponsored and local group businesses.
In addition, the company will emphasize growth in the state-sponsored business with insurance products for Medicaid in selected markets.
"In 2010 we migrated our state-sponsored business into a destination platform that gives us an opportunity for scale," said Braly.
She said WellPoint is working with its affiliated plans and is discussing potential partnerships with other health plans in the state-sponsored area.
In midday trading, WellPoint shares were up 2.26 percent at $74.89 per share.