Insurer WellPoint says 2nd-quarter net income increases, enrollment continues to fall

WellPoint 2Q profit rises 4 pct, outlook increased

INDIANAPOLIS — WellPoint Inc. said its second-quarter net income rose 4 percent, as a boost from lower-than-expected leftover claims helped counter a hit the health insurer took in California, where it delayed premium hikes after taking heavy criticism.

The Indianapolis insurer said Wednesday it saw a $100-million gain in the quarter because claims leftover from previous quarters came in lower than the company expected.

But WellPoint also said earnings from its consumer business unit plunged about $81 million mainly because it delayed California rate increases.

WellPoint took heat from President Obama’s administration and others earlier this year over plans to increase premiums by an average of about 25 percent for individual customers of its Anthem Blue Cross business in California. The insurer called off the hike and then announced a lower increase in June.

WellPoint CEO Angela Braly told analysts Wednesday morning the lower average increase of 14 percent won’t cover costs.

“While we made the decision to move forward with these revised rates given the unique circumstances of the California individual market, this situation is not sustainable over the long term,” she said.

Overall, WellPoint earned $722.4 million, or $1.71 per share, in the three months ended June 30. That compares with earnings of $693.5 million, or $1.43 per share, a year ago, when the company had more shares outstanding.

Excluding investment gains, earnings per share were $1.67 in the latest second quarter.

Operating revenue, which also excludes investment gains or losses, fell 7 percent to $14.22 billion.

Analysts polled by Thomson Reuters forecast, on average, a profit of $1.55 per share on revenue of $14.61 billion.

The California delay probably dropped WellPoint’s earnings by about 15 cents per share in the quarter, Citi Investment Research analyst Carl McDonald said in a research note.

The insurer raised its 2010 adjusted profit forecast to $6.25 per share from $6 per share due mainly to the $100-million gain related to leftover claims. Analysts expect $6.26 per share.

WellPoint runs Blue Cross Blue Shield plans in 14 states and is the largest commercial health insurer based on membership. Its medical enrollment slipped 2 percent, or by 729,000 people, to 33.5 million during the second quarter.

The decline was due to the loss of the company’s UniCare individual and group businesses in Texas and Illinois and high unemployment levels.

Health insurers have struggled with enrollment losses tied to the slumping economy, as employers cut jobs and reduced the number of people covered by their insurance. But companies have shown signs this year that trend may be slowing.

Last year, WellPoint said its second-quarter enrollment dropped 3 percent, or by 1.1 million people. WellPoint competitor UnitedHealth Group Inc. said last week its 2010 second-quarter net income rose 31 percent as costs and enrollment came in better than expected.

WellPoint said it spent 82.9 percent of its premium revenue on providing medical care during the quarter. That’s down from 83.9 percent in the second quarter of 2009.

These medical-loss ratios give analysts a sense of whether insurance is priced correctly, and they’ll be regulated starting next year under the new health care reform law. Details of that part of the law have yet to be ironed out, and its affect on insurers remains uncertain.

WellPoint shares fell $1.97, or 3.7 percent, to $50.83 Wednesday.

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AP Business Writer Marley Seaman contributed to this report from New York.