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WellPoint Sees Small-Business Plans Slip as Law Looms

Updated on

July 24 (Bloomberg) -- WellPoint Inc., the second-biggest U.S. health insurer, said more small employers are scaling back benefits this year, a potential hedge against higher costs expected under the U.S. health-care law.

While small businesses have been cutting back for years, the pace has quickened in 2013, WellPoint Chief Financial Officer Wayne DeVeydt said in a phone interview. Fewer individuals are buying plans outside of work as well, possibly because they expect a better deal when the law’s insurance subsidies debut in January, he said.

“We continue to see the pace actually accelerating,” DeVeydt said in an interview after the Indianapolis-based company announced quarterly earnings. “Is it accelerating because people are willing to go naked, so to speak, before the beginning of the year? There’s really no way to say for sure.”

The number of American workers holding full-time positions fell in June as part-timers hit a record after rising for three straight months, according to the Bureau of Labor Statistics household data. Part-time employment has been outpacing full-time job growth since 2008. Economists cite tough economic conditions as the root cause, with some saying President Barack Obama’s 2010 health-care law exacerbates the trend.

WellPoint reported second-quarter earnings today that beat analyst estimates and raised its full-year profit forecast. The company, owner of 14 state Blue Cross plans, credited medical costs below projections as well as an enrollment boost from last year’s acquisition of Medicaid insurer Amerigroup Corp.

Net-income soared 24 percent to $800.1 million, or $2.64 a share.

Expanded Coverage

The health-care law is expected to increase coverage to about 25 million people by 2016, through subsidies for the uninsured to buy private plans as well as an expansion of the Medicaid program for the poor, according to congressional estimates. New online insurance marketplaces, or exchanges, are due to open on Oct. 1, offering policies taking effect Jan. 1.

WellPoint plans to spend about $150 million this year preparing to sell on the exchanges, much of it on advertising and outreach, DeVeydt said. While the state and federal governments are still racing to build the markets, WellPoint expects them to open on time, the CFO said.

“From our point of view, the states have met all their deadlines,” he said. “It’s a strong push for both the states and the federal government and I know it’s a strong push for us, but right now we have no information to suggest they’re not going to make it.”

WellPoint shares fell less than 1 percent to $87.44 at the close in New York. The stock has gained 44 percent this year.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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