(Reuters) - U.S. health insurer WellCare Health Plans Inc (WCG.N) on Friday reported a better-than-expected quarterly profit and raised its annual earnings forecast, boosted by higher enrolments in its Medicare and Medicaid businesses.
The upbeat results mirror those of WellCare’s larger peers UnitedHealth Group Inc (UNH.N), Aetna Inc (AET.N), Humana Inc (HUM.N) and Centene Corp (CNC.N), all of which reported better-than-expected profits and raised earnings forecasts.
But the results come amid uncertainty in the U.S. healthcare industry with Republican lawmakers seeking to repeal and replace the Affordable Care Act (ACA), former President Barack Obama’s signature healthcare law.
Republican President Donald Trump has threatened to cut off about $8 billion in subsidies that help control costs for low-income Americans under the ACA, popularly known as Obamacare.
Tampa, Florida-based WellCare, which focuses on government-backed Medicare and Medicaid plans, said Medicaid memberships increased 16.6 percent to 2.83 million as of June 30, helped mainly by higher enrolments in Missouri.
Memberships surged 46 percent in WellCare’s Medicare business and by 10.3 percent in its Medicare prescription drug plans business.
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 and Medicare businesses. The lower the ratio, the better for the insurer.
WellCare said its MBR deteriorated to 86.8 percent in Medicaid and to 86.4 percent in Medicare.
The company has been trying to bolster its Medicare Advantage business to offset any likely hit from a possible repeal and replace of Obamacare. It bought smaller rival Universal American Corp for $600 million in April.
Piper Jaffray analysts said on Friday such investments position WellCare for a lower MBR and better profit margins over the long term.
WellCare’s net income fell to $74.1 million, or $1.65 per share in the second quarter, from $90.8 million, or $2.04 per share, a year earlier.
Excluding one-time items, WellCare earned $2.52 per share, beating analysts’ average expectation of $2.24, according to Thomson Reuters I/B/E/S.
Revenue rose 19.8 percent to $4.31 billion. Analysts had expected $4.2 billion.
The company raised its 2017 earnings forecast to $6.75 to $6.95 per share from $6.55 to $6.80 per share.
WellCare’s shares have climbed about 33 percent this year.
(In paragraph 13, this story corrects revenue number to $4.31 billion from $4.1 billion; the error also appeared in an earlier version of the story)
Reporting by Manas Mishra and Akankshita Mukhopadhyay in Bengaluru; Editing by Sai Sachin Ravikumar