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3 Reasons Why Obamacare's Outlook Is Rosy for Insurers 3 Reasons Why Obamacare's Outlook Is Rosy for Insurers

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Health Care

3 Reasons Why Obamacare's Outlook Is Rosy for Insurers

Insurance company earnings reports from the first quarter of the year offer a peek into the future of the Affordable Care Act.

Joe Swedish (second from right), chief executive officer of Wellpoint, and others walk to the West Wing of the White House.  (BRENDAN SMIALOWSKI/AFP/Getty Images)

photo of Clara Ritger
April 30, 2014

WellPoint reported better earnings than expected Wednesday for the first quarter of 2014, adding to the growing list of health insurers showing positive outlooks for the future of the Affordable Care Act's exchanges.

The Blue Cross Blue Shield health insurance company, which offers plans on Obamacare's exchanges in 14 states, upped its annual earnings per share projections by 20 cents to $8.40.

On a call with investors Wednesday about the company's outlook, WellPoint CEO Joe Swedish identified three reasons that the Affordable Care Act is panning out as insurers expected.

 

1. The vast majority of people are paying their premiums.

The rate of people who select a WellPoint plan and then pay the premium to begin coverage is hitting about 90 percent, Swedish said. That could change, because the customers who purchased coverage at the end of the open-enrollment period aren't included in Wednesday's earnings report. But the company said 400,000 people signed up for its exchange plans through Feb. 15, and it anticipates its total to top 600,000.

2. WellPoint is seeing an overall bump in its number of customers.

"We're winning a lot of new members, and whether they had insurance previously or not, we do not know," Swedish said.

The company also reported good retention from year to year of people who were already WellPoint customers. While Swedish couldn't tell whether there was an increase in the uptake of employer-sponsored insurance due to the Affordable Care Act, the company has noticed a decline in the number of customers who typically drop off of employer plans.

WellPoint covered an additional 1.3 million people in the first quarter and predicts that it could double that by year's end.

3. The newly insured are older, eligible for subsidies, and buying cheaper plans.

WellPoint says 80 percent of its customers are subsidy-eligible, and that its most popular plans are rated silver and bronze. That's consistent with UnitedHealth Group's reported enrollment, which the insurer released earlier this month with its first-quarter earnings.

Exchange customers are trending older, Swedish said, which the company expected when pricing the plans.

"The age of our applicants decreased the further we got into the open enrollment," Swedish said, "indicating that young people signed up later in the open-enrollment period."

WellPoint didn't offer much insight into 2015 premium pricing. The company's executives explained that some factors have yet to pan out, such as the makeup of the pool of customers who are able to sign up after the open enrollment, as well as what new regulations and guidelines the administration may hand down to change the financial outlook for the insurance industry.

But the company wasn't touting double-digit premium increases in 2015, which it has previously done. Instead, the company wavered, saying premiums would vary by market. That's consistent with health insurer Aetna's outlook, unveiled during its earnings report call last week.

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