Another major insurer doing better than expected under Obamacare


Another major insurance company is reporting higher-than-expected profits in the wake of the health care law and its mandate to purchase insurance.

Blue Cross Blue Shield’s Wellpoint, the second largest U.S.  insurer, announced Wednesday that its first quarter profit fell compared to last year due to investment spending related to the health care reform law and higher administrative costs from adding new commercial customers.

The insurer, active in Obamacare exchanges in 14 states, has signed up 400,000 through the exchanges and expects its share to grow to 600,000 by the time all sign-ups through April are counted.

Wellpoint’s net income was $701 million in the first few months of this year, down from $885.2 million in the first quarter of 2013. That leaves this year’s earnings at $2.30 a share — better than the $2.12 per share growth that was expected by analysts, according to a Thomson Reuters poll from earlier this year.

Not only did membership grew in the wake of the individual mandate, Wellpoint benefited from higher premiums and a decline in doctor visits — a possible result of an Obamacare-sparked move to higher out-of-pocket costs for patients.

As a result, Wellpoint boosted its 2014 fiscal outlook, anticipating its total 2014 earnings to reach $8.50 a share, up from a current estimate of $8.40 per share, according to Fox Business.

But while insurers are reaping the rewards of mandatory health insurance, Obamacare-related costs are likely to keep premiums rising. Wellpoint notably predicted double-digit increases in premium rates for 2015 in March, and while the company has yet to officially announce its rates, it’s still a possibility.

Whether customers should expect double-digit increases is still up in the air. It’s “not an easy one to answer,” according to Wellpoint CEO Joe Swedish, the Washington Post reports. Each product on each state marketplace will vary, and the makeup of individual health plans within the states is more important than national numbers.

Insurers’ costs will rise dramatically in 2015. Wellpoint CFO Wayne DeVeydt said Wednesday that Obamacare’s tax on insurers will up the price of premiums next year. The tax, applied to each insurance company based on total market share, is expected to bring in $8 billion in 2014 and rise to $11.3 billion in 2015.

Last week, Aetna CEO Mark Bertolini predicted that premium hikes could reach double-digits as well. Aetna’s first quarter profits also beat experts’ forecast, due to an increase in customers from both employer coverage and Obamacare exchanges.

Despite the Obama administration’s rhetoric slamming ‘evil’ insurance companies for profiting from health insurance sales, experts have long expected insurers to win big as a result of the health care law’s mandate to buy insurance and generous federal subsidies to do so.

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