WellPoint enrollment loss slows, 4Q profit climbs

(AP) — Health insurer WellPoint Inc. became the latest managed care company to show signs the recession is relaxing its grip, when it reported on Wednesday slower enrollment losses due to unemployment.

The Indianapolis insurer said its total enrollment slid 3.9 percent last year to 33.7 million people compared to 2008, with small businesses delivering the most significant drop. But enrollment fell only a half percent in the final quarter of 2009.

WellPoint CEO Angela Braly said the unemployment rate has started to stabilize after rising faster than they expected in last year's first quarter.

"But the number of out-of-work Americans remains very high, and we did not expect the employment situation to improve until late this year," Braly said. "If this happens, and employers begin to rehire workers, we should see membership and top-line revenue growth in 2011 and beyond."

Rising unemployment has hurt health insurers because it reduces the number of customers covered by employer-sponsored health insurance. WellPoint is the largest commercial health insurer based on membership. It operates Blue Cross Blue Shield plans in 14 states and Unicare plans in several others.

WellPoint competitor UnitedHealth Group Inc. also said last week that it expects enrollment losses to slow this year.

Enrollment in WellPoint's largest customer segment, employer-sponsored group insurance for small companies, sank nearly 6 percent in 2009 due mainly to rising unemployment.

But Stifel Nicolaus analyst Tom Carroll said WellPoint enrollment is "favorably tilted" heading into 2010. He noted that the insurer ended 2009 with about 100,000 more people than they expected in that segment, and WellPoint reported more than 400,000 new members in its national accounts business as of Jan. 1.

WellPoint earned $2.74 billion, or $5.95 per share, in the three months that ended Dec. 31. That's up from $331.4 million, or 65 cents per share, in the same period of 2008. The insurer's sale of its NextRx subsidiary to Express Scripts Inc. added $4.79 to the per-share results.

Without that, adjusted earnings were $1.16 per share. Operating revenue was $15.06 billion, down 2.4 percent from $15.43 billion the same period in 2008.

Analysts surveyed by Thomson Reuters forecast a profit of $1.02 per share, on $15.13 billion in revenue.

WellPoint said expenses rose in the fourth quarter partially due to higher deductibles in their plans, which cause customers to use more health care at the end of the year before their deductibles renew.

The insurer also said claims tied to swine flu tapered off after October and wound up being less of a concern than they expected at the end of the third quarter.

For the full year, WellPoint earned $4.75 billion, or $9.88 per share, up from a profit of $2.49 billion, or $4.76 per share, in 2008. Excluding NextRx sale gains, the company earned $6.09 per share. Operating revenue fell 1.2 percent to $60.83 billion from $61.58 billion.

Looking ahead, WellPoint expects a profit of at least $6 per share in 2010, while analysts expect about $6.11 per share.

WellPoint shares rose 31 cents to $64.19 in Wednesday afternoon trading. Meanwhile, the Standard & Poor's 500 index fell less than 1 percent.

The company's stock price has been on a tear since late October, climbing more than 40 percent. Carroll attributes much of that gain to investor reaction to the health care overhaul debate in Washington.

Investors have worried for months about the impact any reform push may have on the industry in the form of taxes or possible competition from a government payer. A wide-ranging push to cover the uninsured and control costs has been derailed, but the issue remains unresolved.

Even so, investors are returning to the sector, and they're favoring large companies like WellPoint and United Health, Carroll said.

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AP Business Writer Damian Troise contributed to this story from New York.