Wellpoint expects $20 billion PPACA windfall

By Dan Cook

July 30, 2013

Obamacare is already making insurance giant WellPoint feel a whole lot healthier.

WellPoint trumpeted that good news during an analyst conference call last week to discuss second-quarter results. Not only did its quarterly results beat analysts’ expectations, but newly minted CEO Joseph Swedish said the company expects a windfall of sorts from the Patient Protection and Affordable Care Act — as much as $20 billion by 2016.

Some on Wall Street arched an eyebrow at that one. “Pretty bullish,” said one, who doubted Wellpoint’s ability to grow so far, so fast. But Swedish, though clearly labeling his projections as just that, insisted they were realistic.

Swedish based his optimism on estimates that 25 million more U.S. residents who now go without health coverage will have it by 2016. As Medicaid opens its doors to more middle- and lower-income folks, Wellpoint expects millions to secure some type of coverage through the state insurance exchanges. And Wellpoint will be offering that insurance, though its Blue Cross Blue Shield licensees, in at least 14 states.

 “Over the next few years, enrollment growth in Medicaid, exchange and other products could drive our annual run rate operating revenue to around $90 billion by 2016,” Swedish said during the conference call.

Swedish told the analysts that surge will offset another trend spotted lately, one in which fewer small businesses are purchasing employee coverage. To what degree the one will offset the other, no one yet knows, said Wellpoint CFO Wayne DeVeydt.

“Until the exchanges are up and running, it’s a challenge for us to be overly optimistic, but we are optimistic about our future,” DeVeydt said.

However, again, this plunge in small business plans may be fueling the exchanges, as small businesses direct their employees there for coverage. Some large corporations are expected to follow the same course as they seek to reduce their exposure to the vagaries of fully insured coverage for their workers.

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