While politicians and pundits alike inside the beltway beat up the White House over computer system glitches, health insurance companies still project robust revenue growth and profits from a boom in business from newly insured Americans under the Affordable Care Act.
Take this week’s third-quarter earnings report and financial projections of Wellpoint (WLP), one of the nation’s largest health insurers, which earlier this week raised its earnings guidance for thethird time this year. Amid a flurry of stories about the troubled launch of the federal health insurance marketplace web site known as healthcare.gov, Wellpoint said its improved outlook is due in part to gains from the Affordable Care Act. On Friday, the Obama administration named a contractor to fix the site, saying it should be fixed by the end of November.
Wellpoint is the parent of a number of Anthem and Blue Cross and Blue Shield branded plans and a key player in offering benefits to the growing population of consumers that are purchasing private coverage on exchanges as well as those covered by Medicaid insurance for the poor, which is also expanding under the Affordable Care Act.
“We are raising our 2013 membership and earnings per share guidance, reflecting our strong year-to-date performance and our continued expectation for higher investment spending in the fourth quarter as we begin our implementation of the Affordable Care Act,” Wellpoint chief executive officer Joseph Swedish told Wall Street analysts and investors earlier this week on the company’s third-quarter earnings call. “In the fully insured marketplace, the rollout of public insurance exchanges began October 1, and there has been a lot of activity around this area. We remain optimistic about the long-term membership growth opportunity through exchanges.”
Though health plans are frustrated at the slow sign up, their earnings forecasts and balance sheets reflect largely robust growth. Other health plans like Aetna AET +0.19% (AET), Humana HUM +0.23% (HUM) and UnitedHealth Group UNH +0.01% (UNH) are optimistic, according to public statements of their executives.
Health plans are reporting growth across all of their lines of business.
“The emergence of public exchanges, private exchanges, Medicaid expansions, growing dual eligible and long-term care need, accountable care experimentation, rising consumerism and the confluence of these elements have the potential to create new opportunities for us to grow and serve in new ways,” UnitedHealth Group chief executive officer Stephen J. Hemsley said on the company’s Oct. 17 third-quarter earnings call with analysts.
There is, however, caution from health insurance executives related to implementation of the Affordable Care Act, executives are telling Wall Street.
“While . . . we’ve raised our 2013 adjusted (earnings per share) guidance by $0.40 or 5%, and we are encouraged by our third quarter operating performance, we caution against run-rating this improvement into 2014 given the number of changes to our business due to ACA implementation,” said Wellpoint chief financial officer Wayne Deveydt. “These include: Exchange enrollment. It is simply too early to get an accurate picture of our exchange-based volume or risk profile.”