WellPoint Inc.'s first-quarter net income fell 21 percent but topped Wall Street expectations, and the nation's second-largest health insurer once again raised its 2014 forecast.
The Indianapolis company said Wednesday that the health care overhaul and its coverage expansions were a key reason for the drop compared to last year. The federal overhaul expanded coverage to millions of people starting this year but also enacted taxes and fees, as well as changes to how insurers write their coverage.
Those changes led to insurance coverage with richer benefits and higher costs at the start of the year, spokeswoman Kristin Binns said. Those higher costs came from items like the law's requirement for complete coverage of preventive services and from plans with lower deductibles, which don't encourage patients to hold off on using their insurance.
Deductibles are the amount a patient has to pay out of pocket before most insurance coverage starts. With high deductible plans, insurers typically see a rise in claims or expenses at the end of the year as customers pay off their deductibles and then rush to use their coverage before that deductible resets in the new year.
The insurer's general and administrative expenses climbed 28 percent to $2.49 billion in the quarter in part because of these factors, Binns said.
Overall, WellPoint earned $701 million, or $2.40 per share, in the three months that ended March 31. That's down from $885.2 million, or $2.89 per share, in last year's quarter. Earnings excluding one-time items totaled $2.30 per share.
Operating revenue climbed slightly to $17.64 billion. That excludes investment gains or losses.
Analysts, who typically exclude one-time items from their estimates, expected earnings of $2.10 per share on $17.95 billion in revenue, according to FactSet.
WellPoint Inc. now expects 2014 adjusted earnings to be greater than $8.40 per share. Analysts had forecast $8.41 per share.
The insurer runs Blue Cross Blue Shield plans in 14 states, including California and New York.
Its shares finished at $95.39 on Tuesday. They have risen just over 3 percent so far this year.