Healthcare Stocks: WellPoint (WLP)
In the heat of 2010’s health reform debate, former WellPoint (WLP) CEO Angela Braly became Obamacare’s Public Enemy No. 1 after the President himself railed on the company’s decision to raise some premiums in California by 39%.
The ensuing firestorm turned out to be the life preserver Obama’s signature healthcare law needed to survive — and the beginning of the end of Braly’s tenure at WellPoint. Braly’s successor, Joseph Swedish, has embraced both government business and insurance exchanges — some 45% of its business now is driven by government programs.
The company participates with Medicare and Medicaid and expanded its focus on the latter with the $4.9 billion purchase of Amerigroup in 2012. Although the strategic shift will deliver a strong market position in the future, WLP stock does face significant near-term headwinds.
WLP’s fourth quarter earnings fell by 68%, as policyholders scrambled to use their health coverage before policies were cancelled, and the company divested its 1-800-CONTACTS business. On Jan. 29, WLP stock reported earnings of 49 cents per share, down from $1.51 a share for the same quarter in 2012.
WellPoint, which has signed up some 500,000 Obamacare enrollees so far, has trimmed back its networks — in some cases dramatically — to deliver lower premium prices. In New Hampshire, for example, WLP is the only carrier participating in the exchange, and its plans include only 14 of the 26 hospitals and 65% of the primary care physicians.
That scenario is precisely the one HHS aims to make healthcare stocks reverse with the draft rules. It’s a significant headwind that could impact 2014 earnings for WLP stock.