WellPoint shares drop following second quarter Medicare spending analysis

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Wellpoint Headquarters in IndianapolisShares of the health insurance company with the highest enrollment, WellPoint Inc., fell dramatically after the insurer announced that its second quarter medical care costs spiked following an increase in its Medicare patients.

For the second time this year, the Indianapolis-based insurer has increased its annual forecast following the increase in sales. The enrollment with WellPoint increased by 2.1 percent, reaching 34.2 million, primarily from a rise in elderly and disabled Medicare members. Approximately 75 percent of the new enrollees with Medicare had come from competitors that had withdrawn from the northern California market.

According to chief financial officer for WellPoint, Wayne DeVeydt, these new members were more ill – and therefore required a greater care cost – than the insurer had predicted. This larger number of Medicare members requiring medical treatments added to its enrollment, lead its percentage of income spent on care to rise from 82.9 percent last year to 85.7 percent this year.

He explained that this circumstance is exceptional and that it is not typical across the population over the age of 65. He added that “We’re confident it can be fixed next year.”

The drop in the WellPoint shares in the New York Stock Exchange composite trading was a significant one, having fallen by 5.4 percent to $69.60 by $3.96. This is the most sizeable drop in the company’s stock since August 11, 2010, when new spending regulations for medical care premiums were implemented by Democrats in Congress. That said, over the past year, there has been an increase of 29 percent in the insurer’s stock.

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