WellPoint (ELV 0.15%) has long been the insurer most bullish on Obamacare and the health insurance exchanges produced by the law. The company made a concerted push to participate in exchanges, and management remained comparatively confident even when enrollment numbers looked likely to miss estimates due to technical problems with Healthcare.gov. In reporting its first quarter earnings, management seemed even more confident, noting that they estimated at least 600,000 new members from the exchanges alone (though management noted that even that number may be conservative) and reported 1.3 million new members total this past quarter, a 4% lift in membership.
But, as all investors who have been following the Obamacare story know, it's not just number of members that tell the investment story here -- it's also the demographics and whether the insurer can turn a profit on the new members it enrolls. Failing to do so could potentially cause the often discussed so-called "Obamacare death spiral," wherein premiums would increase and fewer, sicker people would sign up for health insurance, causing a loop of premium increases and declining enrollment. In this video, from Friday's Market Checkup, Motley Fool health care analysts Michael Douglass and David Williamson dig into the numbers and look at the truth behind the Obamacare death spiral and how WellPoint's earnings prove that it won't happen.
