Executives at WellPoint Inc. (NYSE:WLP) may not have much choice about whether to sound enthusiastic about the public health insurance exchange system — they’re selling plans through 14 this fall – but they seem to be genuinely happy to be in the qualified health plan (QHP) market.
WellPoint executives expressed careful, nonspecific, tentative feelings of relief today during a conference call with securities analysts.
The executives said they are pleased with how the company is doing, pleased with how the exchange QHPs are doing — and not too displeased about a drop in small-group health plan enrollment.
What WellPoint thinks about the exchange system is critical, because WellPoint is a big gorilla, or The Big Gorilla, in all of the states in which it has a Blue Cross plan, or a Blue Cross and Blue Shield plan.
Agents and brokers may sell for a WellPoint carrier, or they may sell against it, but they all feel the company shaking the ground.
Here’s a look at five takeaways from the company’s third-quarter earnings call.
1. WellPoint isn’t giving many details about exchange performance, but it says it and its exchange plans are doing great.
The company as a whole is reporting $631 million in net income for the third quarter on $19 billion in revenue, compared with $656 million in net income on $18 billion in revenue for the third quarter of 2013.
The company ended the quarter providing or administering medical coverage for 38 million people, or about 5.7 percent more people than it was covering a year earlier.
Individual commercial enrollment increased 5.9 percent, to 1.9 million.
Overall commercial group enrollment increased 4.7 percent, to 27 million.
Enrollment in local groups of all kinds rose 4.3 percent from a year earlier, to 15 million, but enrollment in small groups has fallen about 15 percent since January, to about 1.6 million.
WellPoint is covering 751,000 people through exchange QHPs.
2. WellPoint executives are happy with the company’s exchange plan enroll claims crystal ball.
Agents, brokers and others who would just as soon see the exchange QHPs disappear under a pile of catastrophic claims may not enjoy listening to the recording of the conference call.
Wayne DeVeydt, the WellPoint chief financial officer, acknowledged that QHP enrollee claims are higher than traditional plan enrollee claims.
“But, relative to our expectations,” DeVeydt said, “it has proven to be less than we expected.”
At another point, Joseph Swedish, the company’s president, said WellPoint has not seen any big surprises related to QHP enrollees dropping coverage or enrolling in coverage outside the normal open enrollment period through special enrollment period applications.
“Our sales assumptions are lining up with what we expected,” Swedish said.
3. The terms “payable” and “receivable” may pop up a lot more.
WellPoint executives are starting to talk about the PPACA “three R’s” risk-management programs — as programs they actually use on a day-to-day business, as opposed to mysterious spreading out from Washington.
The three R’s include a temporary reinsurance program; a temporary risk corridors program, which is supposed to use cash from carriers with good underwriting results to buffer other carriers against poor underwriting results; and a risk-adjustment program that’s supposed to use cash from carriers with low-risk enrollees to help carriers with high-risk enrollees.
Swedish talked about how other health insurers’ pricing might become more rational as the “three R’s training wheels start to come off.”
DeVeydt said WellPoint is keeping careful track of whether it thinks in its a “payable position” with respect to the risk corridors and risk-adjustment programs — meaning that it may have to pay out cash — or whether it believes it’s in a “receivables position.”
In the risk-adjustment program, for example, WellPoint has changed from not booking any payable or receivable in the second quarter, because it thought its enrollee information was immature, to booking a receivable in the third quarter, DeVeydt said.
4. WellPoint thinks exchange plan profit margins will increase.
Swedish noted that profit margins at commercial health insurance plans look better than they might when compared with 2013 results because WellPoint was spending so much money on getting ready for the birth of the exchanges in 2013.
But, in the future, WellPoint should benefit from the ability to help newly insured QHP enrollees use their coverage and get healthier, Swedish said.
Eventually, Swedish said, exchange QHP profit margins may resemble traditional individual commercial policy profit margins.
5. Some small employers might dump their health plans and send workers to exchange. And that’s a problem?
DeVeydt acknowledged that some small employers may be going to other carriers or dropping health benefits. He said WellPoint thinks more small employers may decide to send employees to the exchanges for 2015 as the 2015 enrollment process starts.
“Margins are starting to become fungible between exchanges and small group,” DeVeydt said.
Swedish said the drop fits in with the company’s expectations that small group enrollment would drop significantly over a five-year period.
“We’re managing to that reality,” Swedish said. “Hopefully, we’ll be shifting members from one of our books to another book, and we’d be indifferent to where they’d end up.”