Earnings Preview: WellPoint reports on 1Q Wed

Blue Cross Blue Shield insurer WellPoint to detail 1st quarter results Wednesday

Associated Press

INDIANAPOLIS (AP) -- WellPoint Inc. becomes the second big health insurer to tell investors how it has fared so far in 2013, when it reports first quarter results on Wednesday.

WHAT TO WATCH FOR: Competitor UnitedHealth Group Inc. started insurer earnings reports with a thud Thursday, when it said its first quarter net income sank 14 percent. That was largely because of a lower gain recorded due to leftover insurance claims. The bigger news for investors what that UnitedHealth said it may have to rethink its expectation for earnings growth next year due to funding cuts for Medicare Advantage plans.

UnitedHealth is the largest provider of Medicare Advantage plans, which are subsidized, privately run versions of the federal government's Medicare program for the elderly and disabled people. Earlier this month, the Centers for Medicare and Medicaid Services released data that points to a rate reduction of 4 percent, something that worries insurers since costs are expected to head the opposite way and climb about 3 percent.

Medicare Advantage plans play a smaller role in WellPoint's business, but the rates are a relevant topic for the insurer, which gained about 165,000 Medicare Advantage customers last year when it integrated CareMore Health Group.

WellPoint, based in Indianapolis, has said it will spend roughly $300 million this year preparing for next year's health care overhaul coverage expansions and changes to its Medicare Advantage business. On Wednesday, investors will be looking for updates on the insurer's progress. They expect the overhaul's coverage expansions to affect WellPoint more than other insurers because the company derives a large portion of its business from the individual market and through smaller employers who cover their workers.

The overhaul aims to help millions of people buy health care coverage, and it will take a big step toward that goal this fall, when state-based insurance exchanges begin operating to sell policies to individuals and people with coverage through a small employer. Income-based tax credits are expected to help many people buy coverage.

WellPoint and other insurers are preparing to sell policies on those exchanges and, in some cases, to keep business they could lose once their customers have the option of an exchange. Currently, it can be difficult for individual insurance customers to switch insurers, especially if they have a costly medical condition.

On Wednesday, WellPoint also will continue to introduce new CEO, Joseph Swedish, to analysts. The insurer picked Swedish, a veteran hospital executive, in February, more than five months after former CEO Angela Braly resigned. Swedish started at the end of WellPoint's quarter.

WHY IT MATTERS: WellPoint is the second-largest health insurer after UnitedHealth. It runs Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio and covers more than 36 million people.

WHAT'S EXPECTED: Analysts expect, on average, earnings of $2.38 per share on $17.86 billion in revenue.

LAST YEAR'S QUARTER: WellPoint earnings fell almost 8 percent to $856.5 million, or $2.53 per share, as enrollment slipped and the cost of medical care rose. Operating revenue, which excludes investment gains, climbed 3.4 percent to $15.15 billion.

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