Several insurers report lower profits

Jul 31 2014

WellPoint and Humana say higher expenses kept profits down in the second quarter.

The Wall Street Journal: WellPoint Profit Slips, But Boosts Outlook
WellPoint Inc. on Wednesday said its second-quarter profit slipped as the health insurer recorded higher expenses, masking a boost in revenue and enrollment. Still, the company again raised its earnings outlook for the year, saying it now expects adjusted per-share profit to top $8.60, compared with its prior forecast for earnings of more than $8.40 a share. WellPoint reiterated its expectation for operating revenue above $73.5 billion. WellPoint in January said the people enrolling in new health-law plans were skewing older than its previous individual consumers, but they appeared to match the less-healthy pool the company predicted when it set its prices (Prior, 7/30).

Reuters: Humana Says Profit Fell On Health Reform, Drug Costs
U.S. health insurer Humana Inc said on Wednesday that second-quarter profit fell due to investments in the exchanges created under President Barack Obama's healthcare reform law as well as costly new hepatitis C drug treatments. Humana said membership growth and a lower share count due to stock buybacks had helped offset some of the new costs. The company said net income fell to $344 million, or $2.19 per share, from $420 million, or $2.63 a share, a year earlier. That was in line with analysts' estimates. Most of Humana's revenue is from Medicare Advantage and Medicare Part D, the privately run medical and drug plans under the government health program for older people and the disabled. Humana said revenue rose 18 percent to $12.2 billion. Both Medicare Advantage and Medicare Part D added new customers, and the company's individual customer base increased 122 percent to more than 1.1 million members (Humer, 7/30).

The Wall Street Journal: Benefit Costs Pare Humana's Profit
Earnings met analysts' expectations, but the top line exceeded them. Humana said its profit declined, as expected, because of its investments in health care exchanges and state-based contracts, while higher costs associated with specialty hepatitis C treatments also weighed on results (Calia, 7/30).

Reuters: Aetna Says Medical Costs Rose, Insurer Shares Dropped
Aetna Inc., the third-largest U.S. health insurer, reported a rise in medical costs on Tuesday, raising investor concerns that a long run of low growth in such costs might be ending and pushing shares in the industry lower. U.S. insurer profits have benefited from several years of relatively low use of medical services by their members due to an economic downturn and higher out-of-pocket costs for patients. Aetna said its medical spending rose in the second quarter due to an expensive new treatment for hepatitis C made by Gilead Sciences and the higher costs of covering patients who bought insurance under President Barack Obama's healthcare law for the first time (Humer, 7/29).

A major hospital company also reported its earnings -

The Wall Street Journal: HCA Holdings Profit Rises 14%
In a recent preview of its second-quarter results, HCA had said admissions to its hospitals rebounded and that greater-than-expected benefits from the health-care reform law contributed to the company's performance. At the time, HCA also raised its estimate of the Affordable Care Act's benefit to adjusted earnings this year by one percentage point, from to 2% to 3%. HCA Holdings reported a profit of $483 million, or $1.07 a share, up from $423 million, or 91 cents a share, a year earlier (Stynes, 7/29).

The Associated Press examines the pricing of the hepatitis drug that insurers are concerned about -

The Associated Press: $1,000 Sovaldi Now Hepatitis Treatment Of Choice
Even with insurers reluctant to pay, Sovaldi prescriptions have eclipsed those for all other hepatitis C pills combined in a matter of months, new data from IMS Health indicate. The promise of a real cure, with fewer nasty side effects, has prompted thousands to get treated. But clinical and commercial successes are also triggering scrutiny for the drug's manufacturer, California-based Gilead Sciences Inc., which just reported second-quarter profits of $3.66 billion, or a net margin of 56 percent. Two senators have unearthed documents that suggest the initial developers of Sovaldi considered pricing it at less than half as much. The health insurance industry is publicly scolding Gilead, and state Medicaid programs are pushing back (Alonso-Zaldivar, 7/29).