WellPoint Inc. (NYSE:WLP) is racing to get ready to sell coverage through the new exchanges, or Web-based health insurance supermarkets, that are supposed to open for business in late 2013.
Executives at WellPoint talked about private exchanges and the exchanges to be created by the Patient Protection and Affordable Care Act of 2010 (PPACA) today during a conference call that the company held to discuss its third-quarter earnings with securities analysts.
WellPoint is reporting $691 million in net income for the latest quarter on $15 billion in revenue, compared with $683 million in net income on $15 billion in revenue for the third quarter of 2011.
The company ended the quarter providing or administering medical coverage for about 33.5 million people, or about 2.5 percent fewer than it was covering a year earlier.
Total enrollment in commercial small group and large group plans fell as WellPoint realigned the small group plans the company sells in New York state and increased the fees it charges to administer large, self-insured national accounts plans.
"Enrollment was also impacted by economy-related in-group membership attrition and competitive situations in certain local group markets," the company said in a comment on its earnings.
Wayne DeVeydt, the WellPoint chief financial officer, said during the call that the company is in the middle of the pricing season for coverage that will take effect Jan. 1, 2013.
WellPoint is taking a "disciplined" approach to pricing that could squeeze commercial insured plan enrollment in 2013. But the effects of that pressure will probably be weaker in 2013 than they have been this year, DeVeydt said.
"From a commercial perspective," he said, "the fully insured business remains competitive, but rational overall."
Later in 2013, some individuals who want individual coverage might put off buying insurance until the PPACA exchanges start up, DeVeydt said.
PPACA calls for the government to provide tax credits for low-income and moderate-income taxpayers who buy coverage through the exchanges. PPACA also is supposed to prohibit health insurers from using most types of individual medical information when deciding whether to offer coverage or how much to charge for coverage.
Some states will let the U.S. Department of Health and Human Services (HHS) provide exchange services for their residents. HHS is giving states that set up their own exchange programs flexibility in deciding how to structure the programs. States can choose, for example, whether an exchange will be open to any willing, qualified insurer or whether an exchange will run an active plan selection process that screens out expensive plans and plans with poor quality ratings.
Kenneth Goulet, president of WellPoint's commercial and individual business, said WellPoint believes that only two or three of the 14 markets in which it does most of its business will set up exchanges that operate as "active solicitors."
The California exchange will be using an active bidding process to allocate exchange slots, and WellPoint already has given that exchange a notice of an intent to bid, Goulet said.
WellPoint will submit the bid itself by mid-January 2013, Goulet said.
"California is ahead of most of our markets," Goulet said. "But we think that markets will start moving forward fairly quickly now that the election is concluded."
The consumer groups, carriers and regulatory agencies involved in setting up the California exchange seem to be working well together, Goulet said.
The move to the exchange system is "a change, but an opportunity, and there'll be a lot more people covered," Goulet added. "And we feel that with our brand and our product positioning, we're going to be in good shape to be able to participate on the exchanges."
Large multi-state employers may have trouble shifting to either private exchanges or the PPACA exchanges, once the PPACA exchanges open to larger employers, early on, simply because there may be big differences in how states implement PPACA, Goulet said.