Health Net Inc. has issued an initial 2013 earnings forecast that comes with room for growth according to analysts who cover the health insurer.
The Woodland Hills, Calif., company said Tuesday after markets closed that it expects earnings per share next year to range from $2 to $2.10, with revenue of between $10.7 billion and $11.2 billion.
Analysts expect, on average, earnings of $2.03 per share on $12.06 billion in revenue, according to FactSet.
Health Net provides commercial health insurance and administers Medicaid and Medicare coverage. It does most of its business in California.
The insurer also said it expects health plan membership to fall between 1 percent and 2 percent next year, driven partly by a commercial enrollment drop of between 8 and 9 percent.
Health Net's earnings forecast fell well below Goldman Sachs analyst Matthew Borsch's expectation for $2.25 per share. But the analyst said in a research note he expects improved profitability as the insurer benefits from better pricing in its commercial business and as California resets rates for a Medicaid population.
Citi analyst Carl McDonald said in a separate note the company's forecast doesn't include revenue from its dual-eligible program, which is scheduled to start later in the year.
Dual-eligibles are a category of patients eligible for both Medicaid, the state and federally funded program that covers the poor and disabled people, and Medicare, which focuses on the elderly and the disabled. States are starting to move their dual eligible residents, who generally have expensive medical conditions, into managed care programs that coordinate care and cut wasteful spending. Analysts see this as a potentially lucrative business for insurers.
McDonald said the so-called "duals" give Health Net a chance to either modestly or meaningfully exceed its initial forecast.
The analyst also said the insurer's projected enrollment drop was a good thing because it shows the company is setting prices conservatively next year. Insurers can strain profitability of they drop their coverage prices too low to increase their enrollment.
- Health Net