(Reuters) - WellCare Health Plans Inc’s (WCG.N) quarterly profit more than tripled, handily beating analysts’ estimates, driven by strong growth in enrolments in its Medicaid plans and lower costs in its Medicare business.
Like other health insurers focused on government-sponsored plans for the underinsured or uninsured, WellCare has been benefiting from the expansion of the Medicaid program under the Affordable Care Act (ACA), popularly known as Obamacare.
But, such insurers have come under pressure following attempts by the Republicans to repeal and replace the act.
WellCare, which got two-thirds of its revenue from Medicaid plans in 2016, said membership in the business increased by 156,000 in the fourth-quarter ended Dec. 31.
The additions were mainly due to the company’s acquisition of Care1st Arizona.
However, the amount WellCare spent on medical claims out of the premiums it earned, a key measure of costs known as medical benefits ratio (MBR), rose in the Medicaid business.
The metric increased to 87.2 percent from 86.3 percent in the business.
The company’s MBR fell to 85.8 percent from 88.7 percent in Medicare and to 58.9 percent from 67.3 percent in the Medicare Prescription Drug Plans businesses. Both were well below analysts’ estimates.
The improvement in the Medicare Prescription Drug Plans was due to lower drug prices under a renegotiated CVS contract, Piper Jaffray & Co analyst Sarah James wrote in a client note.
WellCare has been bolstering its Medicare Advantage business, as insurers look to offset any likely hit from a possible repeal and replace of Obamacare.
The company in November agreed to buy smaller rival Universal American Corp UAM.N for about $600 million, in a deal that will add Medicare Advantage members in Texas and New York.
Enrollment in Medicare Advantage plans rose about 7 percent in the United States last year.
WellCare’s net income rose to $44.9 million, or $1 per share, in the three months ended Dec. 31, from $13.0 million, or 29 cents per share, a year earlier.
Excluding items, the company earned $1.03 cents per share.
Revenue rose to $3.52 billion from $3.50 billion.
Analyst on average had expected adjusted earnings of 52 cents per share and revenue of $3.56 billion, according to Thomson Reuters I/B/E/S.
Reporting by Divya Grover in Bengaluru; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila