WellPoint Reports Drop in Q1 Profit, Cites Rising Health Care Costs

Insurer WellPoint reported that profits in the first quarter of 2012 were down 8% compared with one year ago, the Los Angeles Times reports. The insurer cited lower enrollment and rising health care costs as reasons for the drop.

WellPoint -- the second-largest insurer in the U.S. -- oversees Anthem Blue Cross in California, as well as plans in 13 other states.

Earnings Details

WellPoint reported a net income of $856.5 million over the three-month period ending on March 31, compared with a net income of $926.6 million in Q1 2011.

According to WellPoint, revenue grew by 4% to $15.42 billion during Q1 2012. The insurer reported a 2% drop in overall enrollment to 33.7 million during the quarter.

Rising Costs

WellPoint said medical claims costs increased by 5% to $11.77 billion during the quarter. It attributed most of the growth to rising health care costs.

In addition, the insurer said it had higher-than-expected claims from a Medicare plan in Northern California (Terhune, Los Angeles Times, 4/26). In January, WellPoint reported that the plan drew more customers with higher risk profiles who generated more in claims than the premiums they paid. The insurer said the plan was discontinued on Jan. 1 (California Healthline, 1/27).

According to the Times, the plan hurt the company's earnings and shook investor confidence in the company.

WellPoint CEO Criticizes Proposed Ballot Measure

On a conference call with analysts and investors, WellPoint CEO Angela Braly criticized a proposed ballot measure that would give California's insurance department the authority to reject rate increases that it deems excessive (Los Angeles Times, 4/26).

Patient advocates and lawmakers continue to rally support for the proposed ballot measure.

In February, Sen. Dianne Feinstein (D-Calif.) endorsed the measure in an email to more than two million registered California voters. Feinstein urged voters to sign petitions in support of the measure, which needs 505,000 signatures to qualify for the November ballot (California Healthline, 3/28).

Frank Apgar
I am not a fan of Wellpoint. Many may not understand this....the concept of insurance is to spread risk across a population. When the economy turns south, in order to save money, the healthy will tend to cancel their health care coverage. The people who keep their coverage are those who are more likely to utilize services (less healthy) and will continue to drive premium increases higher than they otherwise would have been. This serves to drive the cost of health care up for the remaining people who have health care coverage....a death spiral so to speak. This is a basic problem with the PPACA (AKA Obamacare). The penalty for not coverimg one's self is much lower than one would pay in premiums on an annual basis. The healthy under PPACA will simply pay the fine rather than purchasing health care coverage...leaving others to cover the ever increasing costs of premiums.

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