Health Net Falls After 2014 Forecast Misses Estimates

Health Net Inc. fell the most in 15 months after the insurer’s chief executive officer said earnings next year are likely to be unchanged, falling short of analysts’ projections.

The shares of the Woodland Hills, California-based company declined 6.7 percent to $27.60 at 4 p.m. New York time, the biggest one-day drop since August 2012.

CEO Jay Gellert said 2014 earnings won’t increase from this year, while analysts had forecast a 26 percent rise to $2.73 a share, according to data compiled by Bloomberg. The health insurer struggled in 2012, twice cutting its profit forecast that year after having problems with processing claims and higher-than-expected medical costs. Gellert said he anticipates changes in the company’s membership makeup as people begin using the online health marketplaces created under the U.S. Patient Protection and Affordable Care Act.

“We see 2014 as a transition year,” Gellert said today on a conference call with investors after the company reported third-quarter earnings.

Health Net hasn’t added as many new members as anticipated in the second half of this year, Jim Woys, the company’s chief operating officer, said. “For this reason, we are lowering our full year 2013 commercial enrollment guidance from a decline of 8 percent to 9 percent to an expected decline of 11 percent to 12 percent,” Woys said in a statement.

The insurer is participating in California’s new health exchange and offered the lowest premiums across Southern California for plans beginning Jan. 1, Scott Fidel, a Deutsche Bank analyst, said in May. The rates may be a gamble, attracting sicker customers and driving up medical costs, Fidel said at the time.

The company also is selling plans through Oregon’s state exchange and the federal website for Arizona, Gellert said on the call.

Health Net shares have gained 6.8 percent in the last 12 months, compared with a 37 percent gain in the Standard & Poor’s 500 Managed Health Care Index of major health insurers.

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