Short Takes On News & Events

WellPoint Softens Forecast For Obamacare Rate Hikes

By Jay Hancock

April 30th, 2014, 12:18 PM

Welcoming a surge of young, last-minute enrollees, the biggest player in the health law’s insurance marketplaces on Wednesday tempered its prediction for substantial 2015 rate increases.

Five weeks ago WellPoint executive Ken Goulet told analysts that premium increases for 2015 plans “will probably be in double-digit plus.”

On Wednesday’s conference call to discuss first-quarter results, WellPoint bosses talked less about price hikes and more about the surprising number of young adults they signed at the March 31 enrollment deadline for plans sold through the online exchanges.

The volume of last-minute enrollment “was not only substantial vs. our expectations,” said Wayne DeVeydt, WellPoint’s chief financial officer, but “we saw in each day’s applications the average age coming down in meaningful fashion.”

For insurance pools in which the healthy subsidize the sick, analysts watch the age of enrollees carefully. Younger members are typically healthier than older ones and are seen as an important stabilizer — even though their premiums are lower.

WellPoint is still analyzing the 1 million or so members who signed up for its new plans through the online portals as well as directly with the company and its Anthem Blue Cross divisions. But executives said repeatedly they were pleased with the mix of customers and with the prices they set for 2014.

“We think because we hit the sweet spot” in 2014 rates, “there’ll be less volatility in pricing for our members than there would be for others,” DeVeydt said.

Jefferies & Co. analyst David Windley asked if WellPoint still expected double-digit 2015 premium increases, which the company previously said could be driven partly by health-law taxes and a smaller “reinsurance” financial safety net for high-cost patients.

“It’s not an easy one to answer because it’s going to vary by market, by product,” DeVeydt said. “The pricing will ultimately be reflective of what we’re required to cover.”

WellPoint doesn’t know how many exchange plan members were previously uninsured, and it’s still analyzing how many of them had been WellPoint customers before, executives said.

“Obamacare is continuing to play out as a favorable growth driver for the company,” Ana Gupte, an industry analyst for Leerink Partners, wrote in a note to clients Wednesday morning.

So far about 90 percent of the members who signed up have paid their premiums, WellPoint executives said.

WellPoint’s profit for the first quarter of $701 million easily beat analysts’ forecasts. But the difference had more to do with unexpectedly favorable tax rates than anything in the insurance business.

WellPoint’s expectation for the medical cost trend — health-spending increases based on changes in prices and procedures — remains from 6 to 7 percent, executives said.

They also delivered a bit of good economic news, saying turnover in plans sponsored by large corporations had declined.

“It appears that the layoffs have substantially declined at large-group employers,” DeVeydt said.

3 Responses to “WellPoint Softens Forecast For Obamacare Rate Hikes”

  1. Lucy says:

    I’m sure it is young people who are unemployed and on medicaid who signed up. Just another trick.

  2. Tony says:

    I am scratching my head trying to figure out how the headline is connected in any way to the story.
    The headline said that WellPoint “softens forecast for…rate hikes,” yet no where in the story is a reduction in rate hikes even suggested. In fact, the story then goes on to say that in fact WellPoint DIDN’T focus on rate hikes, instead focusing on enrollment numbers.
    To be fair, the WellPoint execs did say there might be less volatility (meaning wide or rapid swings in rates), but they NEVER said that rates wouldn’t rise substantially, as the lead paragraph specifically stated: “WellPoint… tempered its prediction for substantial 2015 rate increases.”
    Can someone please point out to me exactly where in the story the WellPoint execs said that rate increases would not be “substantial?”
    Or is this simply playing with words, meaning that the writer took a little nugget and applied it (improperly) to a different aspect of the law?
    Is that sort of like saying: “More than 10,000 people were laid off from full-time work in a steel mill, but some picked up work delivering newspapers,” meaning that the news of the layoffs was “tempered” by the news of the paper delivery jobs?
    I’m sure those laid off feel much better now.
    Just like those of us who are — and will continue — to experience high rate increases should feel better because there are more of us in the same boat (enrollment numbers).
    Maybe the headline should read: “WellPoint execs avoid discussing rate increases, but say more people will be paying higher rates.

  3. Michelle says:

    I’m glad I’m not the only one that couldn’t figure out how this writers headline went with the story.