WellPoint's (NYSE: WLP) second quarter profit fell 3 percent, primarily because of higher-than-expected medical costs for Northern California seniors enrolled in Medicare Advantage plans, according to the Los Angeles Times.
The Indianapolis-based insurer's enrollment rose 2.1 percent to 34.2 million; most of its new members previously were customers of rival plans that exited the northern California market. These enrollees were sicker than the company had expected or priced for and, consequently, medical claims climbed 8.5 percent to $11.92 billion in the second quarter. The influx of sicker members aged 65 and older pushed WellPoint's MLR ratio to 85.7 percent from 82.9 percent a year earlier, according to Bloomberg.
Although admitting these high medical claims would hurt profits this year, WellPoint's Chief Financial Officer Wayne DeVeydt said the setback would be isolated to 2011. "This won't change our strategy," he told Reuters. "It's one location, it's easy to fix in our opinion and we're going to continue to expand."
Aetna (NYSE: AET), meanwhile, posted a 9 percent increase in profit, earning $536.7 million in the second quarter, up from $491 million a year earlier, the LA Times notes. "Three main factors account for our success: disciplined pricing and medical cost management; lower than anticipated utilization of health care services by our members; and strong cash flow generation," said Aetna CEO Mark Bertolini.
The Connecticut insurer also reported a 2.1 percent decline in revenue to $8.32 billion, compared with $8.5 billion in the second quarter of 2010, partly because Aetna lost 76,000 members, reports the Hartford Courant. Aetna said its MLR for commercial health insurance was 81.2 percent for the quarter, compared with 83.2 for the same period last year.