WellPoint overcame a 68 percent drop in its net income on the strength of high membership utilization, resulting in a rise in operating revenue.
WellPoint, which sells Blue Cross Blue Shield plans primarily under the Anthem and Empire banners, reported that fourth-quarter 2013 net income dropped to $148.2 million, or 49 cents a share, from $464 million, or $1.51 a share in the year-ago period, which included a favorable tax settlement. The company was hit by an impairment charge for diminishing value on the pending sale of its 1-800-CONTACTS business.
High utilization was "prompted by some members seeking services prior to the potential changes in coverage in 2014," as some plans were being cancelled, said CEO Joseph Swedish in an earnings call with reporters and analysts.
Operating revenue rose 16.3 percent to $17.6 billion in the fourth quarter from $15.2 billion previously with full inclusion of Amerigroup and positive results in the commercial segment.
Another positive, Swedish said, is that despite difficulties with the rollout of the state and federal health insurance exchanges, enrollment is ahead of projections.
As of last week, WellPoint, the nation's second largest insurer, had received 500,000 applications for individual coverage on the public marketplaces, as activity grew from Thanksgiving through a spike at the end of the year, Swedish said. Another increase in applications is expected in March ahead of the enrollment deadline.
The insurer's benefit-expense ratio, or medical loss ratio – the portion of premiums used for patient care – was 87.8 percent compared to 87.3 percent the previous year. That was due to higher individual utilization in the commercial and specialty segment ahead of Affordable Care Act implementation in January, the earnings report said.
Membership grew a net of 145,000, or 0.4 percent, on gains in local group business and California Medicaid, with declines in national and individual businesses.
The company reaffirmed its recent forecast for at least $8.00 a share for all of 2014 and $73 billion in operating revenue, Swedish said.
For the full year, the second-largest insurer reported net income was $2.5 billion, or $8.20 a share, compared to $2.7 billion, or $8.18 a share, in 2013.
This story is based on a report appearing on Healthcare Payer News.