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Ahead of the Bell: WellPoint shares rate 'neutral'

By The Associated Press
Associated Press

While poised to grow its Medicaid business, WellPoint will have to fight to retain a big chunk of customers, according to Credit Suisse, after the debut of government-run insurance exchanges next year that help people shop for coverage.

The nation's second-largest insurer also is dealing with a change in leadership at a crucial time, analyst Ralph Giacobbe said. CEO Angela Braly resigned last August and WellPoint has yet to announce her successor.

Giacobbe initiated coverage of the Indianapolis company with a "neutral" rating. That's down from the previous Credit Suisse rating of "outperform" under another analyst.

Giacobbe said in a Wednesday research note that WellPoint's recently completed acquisition of Amerigroup Corp. more than doubles the insurer's Medicaid enrollment. Medicaid is the state-federal program that provides coverage for the needy and disabled.

Insurers and analysts expect that market to grow as the health care overhaul broadens the number of people who are eligible and as states seek out insurers to manage residents who are eligible for both Medicaid and the federal Medicare program.

Starting with enrollment this fall, customers seeking individual coverage and insurance through some small employers will be able to use online exchanges mandated in the overhaul. These exchanges are designed to make comparison shopping easier for customers, and Giacobbe said WellPoint's Blue Cross Blue Shield brand will help the insurer.

But the analyst also said the exchanges will challenge companies like WellPoint Inc. to keep the business they already have.

"Our concern largely stems around WellPoint's need to defend its current individual and small group business and potentially face margin pressure when exchanges go live in 2014," the analyst wrote, noting that the insurer could either lose covered lives to competitors or keep the business but at a lower profit margin.

Copyright:(c) 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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