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WellPoint close to completing exchange product design, pricing

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Executives at WellPoint Inc. (NYSE:WLP) continue to believe that the Patient Protection and Affordable Care Act (PPACA) exchanges will bring the company new business.

Joseph Swedish, the health insurer’s new chief executive officer, said today during a conference call with securities analysts that the company feels good about its preparations for the new, Web-based health insurance supermarkets, which are supposed to start signing up customers Oct. 1.

“We have substantially completed our exchange-based product design and pricing development work,” Swedish said during the call, which WellPoint held to discuss its first-quarter earnings.

WellPoint has signed contracts with the providers who would serve the exchange plan enrollees, and it believes its brand-name strength and reasonable costs should help it achieve “meaningful growth” in the exchanges over time, Swedish said.

About half of  the states look as if they will run or help run their exchanges, and about half look as if they will use the federal exchange program, Swedish said.

WellPoint operates as Anthem — a company that holds the Blue Cross license in some states and both the Blue Cross and Blue Shield licenses in others.

WellPoint hopes to compete in the exchanges in all of its “Blue markets,” “but obviously can’t fully commit until we know the rates and regulations,” Swedish said. 

Swedish said he thought WellPoint operating profit margins on the exchanges would eventually be in the “low to mid single-digit range.”

Stephen Hemsley, president of UnitedHealth Group Inc. (NYSE:UNH), said last week, during his own company’s earnings call, that the company “will be very selective in where we participate.” Hemsley said he did not expect the exchanges to be a significant factor in its 2014 commercial market outlook.

WellPoint is reporting $885 million in net income for the first quarter on $18 billion in revenue, compared with $857 million in net income on $15 billion in revenue for the first quarter of 2012.

The company ended the quarter providing or administering medical coverage for 36 million people, up 6.3 percent from the total recorded a year earlier.

Company executive said the company has been seeing less “in-group attrition,” or shrinkage in employer head counts, than it has been experiencing  since the recent economic slump started. The company is hoping to see commercial national accounts enrollment start growing again in 2014.

Analysts asked Swedish about the possibility that the start of the PPACA exchange system could lead some small employers — which will face no obligation under PPACA to provide health benefits — to shut down group health plans and send the enrollees to the exchanges.

Swedish said he and colleagues are keeping their eyes wide open but feel it’s too early to give an opinion on the effects of the exchanges on small-group enrollment.

In other earnings news, another health insurer, Centene Corp. (NYSE:CNC), a carrier that focuses on the government plan market, is reporting $23 million in net income for the first quarter on $2.6 billion in revenue, compared with $23 million in net income on $1.7 billion in revenue for the first quarter of 2012.

Enrollment in the plans Centene manages increased to 2.7 million, from 2.1 million.

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