UPDATE 2-WellPoint fourth-quarter profit falls on rising medical use

Jan 29 (Reuters) - WellPoint, the second-largest U.S. health insurer, on Wednesday reported a lower quarterly profit as consumers increased their use of medical services ahead of the cancellation of some insurance plans at the end of 2013.

The company also took a charge for the recently announced sale of its contact lens business, 1-800 Contacts, to private equity firm Thomas H. Lee Partners, which caused a sharp decline in net profit.

WellPoint, which sells Empire and Anthem Blue Cross Blue Shield plans, also said its costs went up as it prepared for the rollout of the national healthcare reform law, often called Obamacare, and an expected increase of 1 million new members this year.

The company is one of the biggest players on the new insurance exchanges created under President Barack Obama's national healthcare law. Competitor Aetna Inc is in about 16 states while UnitedHealth Group Inc, the largest insurer, has only offered plans in a few states.

So far, about 3 million people have enrolled in these plans, which went into effect on Jan. 1, according to the government. The independent Congressional Budget Office had forecast that about 7 million people would sign up for 2014 coverage and enrollment is open until the end of March.

Sign-ups are lagging targets because of technology problems in the first two months after the launch of the national website HealthCare.gov that sells insurance plans in 36 states. The other 14 states run their own sites.

WellPoint said net profit for the fourth quarter fell to $148.2 million, or 49 cents per share, from $464 million, or $1.51 per share a year earlier. Excluding costs for the sale of 1-800 Contacts and investment gains, earnings fell to 87 cents per share from $1.03 per share, which also included investment gains and acquisition costs.

The quarterly earnings were in line with analyst expectations, according to Thomson Reuters I/B/E/S.

The company forecast earnings of above $8 per share in 2014, representing a likely drop from the $8.52 it earned in 2013 before special items. Analysts on average were expecting 2014 earnings to fall to $8.39 per share, according to Thomson Reuters I/B/E/S.

"Overall, this appears to be a solid quarter, although more in line compared to (WellPoint's) recent string of impressive beats," Oppenheimer & Co analyst Michael Wiederhorn said in a research note.

Shares closed on Tuesday at $84.30 on the New York Stock Exchange.

The company spent 87.8 percent of its premiums brought in on medical claims, up from 87.3 percent a year ago. It said that as old individual plans were being canceled ahead of the introduction of the new 2014 insurance, customers used more medical services.

Spending on medical procedures, doctor visits and hospitalizations has been at a historical low for the past several years. This has helped insurers keep these medical cost ratios down while still complying with the Affordable Care Act, which requires them to spend at least 80 percent of plan premiums on care or refund customers the difference.

WellPoint said it added 145,000 members during the quarter as it picked up small business customers and new enrollees in the California Medicaid program for the poor. It had 35.7 million members at the end of 2013.

Millions of individual plans sold in 2013 do not meet the Affordable Care Act's new standards for minimum benefits in 2014. While some insurers extended these old plans into 2014, other plans were still cancelled at year end.