WellPoint Inc., the second largest health insurer, posted better-than-expected second quarter earnings Wednesday by taming medical cost increases in its employer-based business and benefiting from the Medicaid operations in its recent Amerigroup transaction.
Looking forward to the years to come, WellPoint CEO Joseph Swedish said in an earnings conference call that he anticipates up to a $20 billion boon in operating revenues by 2016 from the expansion of Medicaid and individual coverage on the health insurance exchanges under the Affordable Care Act.
Net income for the second quarter 2013 was $800.1 million, or $2.64 a share, a 24.3 percent jump from the same period in 2012 of $643.6 million, or $1.94 a share. Adjusted net income was $2.60 a share, an increase of 27.5 percent over the $2.04 in last year's second quarter.
Operating revenue for the April through June quarter, excluding investment gains and losses, also accelerated 16 percent to $17.6 billion compared with $15.2 billion in the year-ago quarter.
"We have achieved improvements in our Medicaid operations, largely reflecting benefits from the Amerigroup transaction," Swedish said, referring to the acquisition that took place at the end of last year.
Medicaid is clearly a high growth area for WellPoint, Swedish said. "And while it is still early, we see the potential to gain several hundred thousand new Medicaid and dual eligible lives by yearend 2014," he said on the conference call. "This potential for top line growth far outpaces anything that we have seen in recent years."
"Over the next few years, enrollment growth in Medicaid, exchange and other products could drive … operating revenue to around $90 billion by 2016," he said.
WellPoint "modestly" raised its full year 2013 EPS and operating cash flow outlook, said Wayne DeVeydt, WellPoint executive vice president and CFO.
"However we are still being prudent given our continued expectation for a fluid environment and investment spending over the second half of the year as we prepare for 2014."
WellPoint anticipates full-year net income of $8.00 a share, slightly higher than the previous $7.80 a share.
Enrollment increased 6.3 percent to 35.7 million members, in large part due to its acquisition of Amerigroup and its Medicaid managed care enrollees, which partially offset declines in its commercial and Medicare business.
In related news, UnitedHealth Group Inc, the largest health insurer, reported its second-quarter earnings last week, highlighting its consistent enrollment growth and margin expansion at its health services business Optum.
Overall net income for the second quarter 2013 was $1.4 billion, or $1.40 a share, 10 percent more than the $1.34 billion, or $1.27 a share, in the second quarter of 2012. Earnings from operations were $2.4 billion.