(AP) WellPoint's fourth-quarter earnings tumbled 68 percent, as customers of the nation's second largest health insurer raced to use their coverage last fall before it lapsed due to the health care overhaul.
The Indianapolis company said Wednesday that its medical expenses spiked 18 percent to $14.58 billion due in part to higher use of individual policies in advance of the overhaul's coverage expansions, which unfolded this year.
Insurers typically see a rise in use at the end of each year as patients pay up their deductible, or the out of pocket cost before most coverage starts, and then use their coverage before that deductible renews in the new year. But WellPoint said it also saw a jump in use from patients who wanted to take advantage of their policies while they still had them.
At least 4.7 million customers nationwide received notices from their insurers last fall that their plans were being canceled because they didn't meet coverage requirements established under the overhaul, the federal law that aims to cover millions of uninsured people. The actual number is likely much higher because officials in nearly 20 states said they were unable to provide information on cancellation notices or were not tracking it.
The overhaul also provided help to many with canceled coverage by offering income-based tax credits that customers can use to buy a new plan on state-based insurance exchanges that started last fall.
But complaints over the cancellation notices eventually led President Obama to announce that people could keep their individual policies if state regulators approved.
WellPoint spokeswoman Kristin Binns said health care use started climbing after customers received their notices and before the president's November announcement. The insurer runs Blue Cross Blue Shield plans in 14 states, and its biggest market, California, did not allow plans to be continued.
WellPoint provides individual insurance coverage for about 1.8 million people, or 5 percent of its total medical enrollment of 35.7 million. It did not say how many of its customers received cancellation notices.
In its financial report for the last three months of 2013, WellPoint said it earned $148.2 million, or 49 cents per share, down from $464.2 million, or $1.51 per share, a year earlier.
Earnings excluding one-time items totaled 87 cents per share for the latest quarter. Analysts expected 86 cents per share, according to FactSet.
Operating revenue jumped 16 percent to $17.65 billion, helped by the insurer's acquisition of Medicaid coverage provider Amerigroup. That excludes investment gains or losses. Analysts expected $17.8 billion.
WellPoint said results also were affected by a charge it booked for unloading its 1-800-Contacts business and by an income tax expense that soared to $161 million from $16.8 million in the 2012 quarter, when the insurer recorded a favorable tax settlement.
For 2014, WellPoint expects earnings of more than $8 per share, which is what Chief Financial Officer Wayne DeVeydt said in October that they hoped to forecast. Analysts expect, on average, earnings of $8.35 per share.
The insurer also said Wednesday that its board voted to raise WellPoint's quarterly dividend to 43.75 cents per share from 37.5 cents.
WellPoint's stock fell 74 cents to $83.56 in morning trading Wednesday. Its stock price soared about 52 percent last year and set several new, all-time high marks before closing 2013 at $92.39.