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Health Carriers Report Net Income Gains

By Allison Bell

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Two different types of health insurers reported higher third-quarter earnings today.

Health Net Inc., Woodland Hills, Calif. (NYSE:HNT), is a company that still has significant commercial health insurance operations.

WellCare Inc., Tampa, Fla. (NYSE:WCG), focuses on the Medicare and Medicaid plan markets.

Health Net is reporting $62 million in net income for the latest quarter on $2.8 billion in revenue, compared with $58 million in net income on $2.8 billion in revenue for the third quarter of 2010.

The company ended the quarter ended the quarter provided or administering health coverage for 3 million people outside the military’s TRICARE program, up from 2.9 million people a year earlier.

Enrollment in TRICARE – a program that provides health coverage for military dependents and retirees who receive care outside military facilities and facilities for veterans – fell to 3 million from 3.1 million.

Large commercial enrollment increased 1.5%, to 963,000, and individual and small group enrollment fell 3.7%, to 420,000.

Selling expenses fell to $58 million, from $59 million.

WellCare is reporting $88 million in net income on $1.5 billion in revenue for the third quarter, up from $43 million in net income on $1.4 billion in revenue for the third quarter of 2010.

WellCare ended the quarter providing or administering medical coverage or Medicare Part D prescription drug coverage for 2.4 million people, up from 2.2 million people a year earlier.

Jay Geller, Health Net’s president, said during his company’s earnings call that the Patient Protection and Affordable Care Act of 2010 (PPACA) and market trends seem to be moving the rest of the health insurance market toward the kind of actively managed care that is already common in California.

Within the next few years, “we are all going to be in managed care and in value networks,” Gellert said.

The fact that Health Net is already comfortable with steering patients toward high-value providers should give the company an advantage in states where management of care has been more easygoing, Gellert said.

Gellert said he thinks Health Net will have better luck with selling to small and midsize groups in Arizona, Oregon and parts of California where the company hasn’t previously had products.