Everything isn't well at
WellPoint (NYSE: WLP). The company crushed
earnings estimates for the third quarter, but it's hard for
investors to get too excited. The economy may
have recovered a little, but
jobsare still hard to come by, and that's putting
pressure on the health insurer's revenue.
And of course there's that whole
government-sponsored public planthat's hanging over the
insurers' heads.
Despite the earnings beat, it still wasn't a pretty
quarter for WellPoint. Revenue was down slightly because of
unemployment, and the flu and COBRA coverage for workers who
lost their jobs cut into earnings. As part of the stimulus
package from earlier this year, the government offered to
pony upto help the unemployed pay for COBRA coverage.
While it's added revenue for insurance companies, it comes at
a price because people who go on COBRA tend to be those who
need it the most and therefore rack up higher medical
bills.
As with
UnitedHealth Group (NYSE: UNH), which
reported last week, it doesn't look like 2010 is going to be
much of a turnaround year for WellPoint. In addition to the
lost revenue from the unemployed, COBRA could continue to
bite at earnings because Congress may extend the subsidy
through the middle of next year and lengthen the time
unemployed people could get the subsidized benefits from nine
to 15 months.
WellPoint,
Humana (NYSE: HUM),
Aetna (NYSE: AET),
CIGNA (NYSE: CI), and the rest of the
industry are sitting at rock-bottom prices, but that doesn't
necessarily make them a bargain. In the best-case scenario,
health-care reform doesn't hurt the industry too much and the
insurers get a nice bump as the
uncertaintygoes away. Even under that scenario, it looks
like it'll be a long turnaround for them.
This article was originally published as
WellPoint Sick for Another Yearon
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