Wellpoint 1Q14 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.


Serve 1/9 Americans

“our 37 million members, representing roughly one in nine Americans.’

Robust growth from exchanges

“Applications especially near the end of the quarter were robust. Our March 31 membership includes applications through February 15th and we have enrolled over 400,000 members. Through the entire open enrollment period which officially ended April 15th, we now expect to add more than 600,000 members from public exchanges.”

“We are also serving approximately 100,000 members in private exchanges, which represent a new option for employers and their employees to obtain health coverage. Taken together, our overall enrollment growth and our positioning in the exchanges represent tangible examples of how our commitment to driving value for our customers is resonating with employers, individuals and their families on a daily basis.”

Exchange applicants match expectations, skew older. Younger people procrastinated

“For exchanges, the general characteristics of applicants, including average age are tracking well versus our expectations. We anticipated that exchange enrollees would generally be older than our legacy individual customers and our pricing assumptions for both on and off exchange products reflected this view. We did notice the average age of applicants decreased and further we got into the open enrollment period, indicating that younger age applicants signed up later in the period.”

PRoduct selection and actuarial value has been consistent with expectations

“Product selection has also been consistent with expectations as silver and bronze have been the two most popular metal levels by a wide margin. The actuarial value of the products selected by new applicants is also in line with our projections to date and we will continue to monitor product mix on a state-by-state basis.”

Brand name is helping

“We’re continued to see signs at our brand name and network quality are carrying more of an advantage in the market than we had expected. For example, there are geographies where we believe we are gaining share despite lower priced competition, which points to the value of our local market depth, knowledge, brand, reputation and networks.”‘

Small group member declines did exceed expectations

“with respect to our small group business, we continue to be mindful of the potential for employer coverage changes in light of the exchanges and we did see Q1 small group member declines above our expectations. However, this was offset by stronger large group membership trends in the quarter.”

Margins on exchange business coming in line with targets

“we are very pleased with the mix of business and probably more importantly the affirmation of the strategy we laid out around the design of our products and formulary. So our margins within our markets varied but they are still within our targeted range in total of 3% to 5% category.”

We’re in the sweet spot based on average age

“I would tell you that we saw in each day’s applications, the average age coming down in a meaningful fashion. And from our perspective, again, only time will tell but relative to the average age we’ve seen in that, we have hit the sweet spot. Relative to the claims activity, we have pushed over 90% of the claims we received in the first quarter through our predictive analytics and modeling we’ve done.”

Small group decline came faster than expected

“for all the areas that I performed on membership, the one that was a little surprising was the level of small group membership that actually no longer provided coverage post-January 1. So our early renewals were successful but for those, post that day, once the exchanges got up and running, we saw really — we missed our expectations in some of the small group in the quarter. From our perspective, we expected that to occur at some point in time. In fact, it occurred sooner was a little surprising but nonetheless we like the fact that our positioning on the exchanges is what is. It was more than offset though by a large group in and of itself in the exchanges.”

Happy with pricing strategy, better data in 2015

“we are really pleased with our strategy and the affirmation of our pricing strategy relative to what we built. We actually feel like we have more data to go into ’15 pricing than we did going into ’14 and we’ve got validation.”

Script trends a little better than expected on exchanges

“We’ve seen modest acceleration in script trends, but I think it’s important to recognize too for example on exchanges we expected acceleration in script trends, and in some ways the exchanges are so early but coming in slightly better than the acceleration we expected.”

Layoffs have substantially declined at large group employers

“I think what we are finding is we got good retention, we got good sales and it appears that the layoffs have substantially declined a large group employers.”