WellPoint reported third-quarter earnings that were about 5 percent lower than last year's period but still ahead of expectations due to lower medical costs and healthy membership, as it continues to make investments for insurance expansion under the Affordable Care Act.
The insurer said that its third-quarter net income was $656.2 million, or $2.16 a share, compared with $691.2 million, or $2.15 a share in the year-ago period.
WellPoint said in the earnings report that it had 35.5 million members as of the end of September, 2 million, or 6 percent, more from the year-ago quarter. Its Medicaid enrollment expanded by 2.4 million members on its Amerigroup acquisition at the end of 2012, while its commercial and Medicare Advantage lines lost members.
Operating revenue totaled $17.7 billion, 17.2 percent more than the year-ago third quarter, driven the Amerigroup business.
Based on "strong performance, our continued preparation and the outlook for coming market changes under the Affordable Care Act," CEO Joseph Swedish raised membership and earnings per share outlook. Full-year net income is now expected to be at least $8.40 a share.
In an earnings call, Swedish said that with the opening of the health insurance exchanges, "initial interest in our exchange product appears robust. In the first week of exchange opening, we received over 35,000 calls to our service centers, over double the historical weekly volume. In the second week, it increased to 45,000 callers as consumer awareness began to ramp up across the regions."
WellPoint has TV and radio advertising running in targeted markets, with partnerships with Univision, several retailers and using social media.
Swedish referenced the ongoing interface and technical challenges that have been widely reported. However, he noted that the "environment is generally consistent with our expectation that the initial phase of the implementation would be choppy and greater manual workload. We have prepared and invested in and expected challenges during the sign-up period, and we have thousands of people dedicated to full time exchange support in locations across the country."
In its earnings report, WellPoint said it expects medical cost trends in the 6 percent range for 2013. Unit cost increases and utilization have been lower than anticipated through the first nine months of the year. The insurer shaved 50 basis points from its benefit expense ratio to 84.9 due to improvements in its Medicare business.