- Anthem on Wednesday reported net income of $2.28 billion in the second quarter, almost double what it posted a year ago as people deferred care to avoid exposure to the novel coronavirus. Operating revenue was $29.2 billion, coming in slightly below Wall Street expectations.
- The payer had a medical loss ratio of 77.9%, down from 86.7% in the prior year and also below what analysts had predicted. Executives told investors on an earnings call they expect the MLR will increase by about 200 basis points relative to baseline in the back half of this year.
- Overall membership was up 4% year over year, slightly above analyst expectations as growth in Medicaid outpaced commercial losses. Anthem executives said they expect the Medicaid increases to grow through the rest of this year as unemployment follows the economic fallout of the COVID-19 pandemic.
Anthem CFO John Gallina said on the earnings call Wednesday morning that utilization among members was down about 40% in April and 20% in May, but returned to 90% of baseline in June. The payer expects pent up demand to push utilization above normal levels in the third and fourth quarters.
SVB Leerink analysts labeled the second-quarter results “solid,” noting the payer has good visibility and should see stable results for the next six to 18 months. Anthem kept its full-year earnings guidance but has withheld 2020 guidance on all other measures.
Payers, unlike hospitals and medical practices, have not taken a financial hit from the pandemic so far and have in fact reported significant profits. Prodded by Congress in some cases and in a bid to sidestep criticism from cashing in on a public health crisis, insurers have waived co-pays for COVID-19 testing and treatments as well as some care not directly related to the coronavirus.
Other payers so far have reported similar performance for the second quarter. Centene and UnitedHealthcare reported they had doubled second-quarter profit from the previous year but also saw major drops in MLR, as expected. Centene, which has a large government-sponsored coverage book of business, posted a membership increase while UnitedHealth’s membership dropped.
Cigna and Molina will report later this week and Humana next week.
Anthem executives said in April the first quarter was “largely unaffected” by the pandemic. The second quarter was far more impacted, but CEO Gail Boudreaux said Wednesday the company’s diversified business lines has provided “a very resilient catcher’s mitt across our book of business.”
The operating revenue of $29.2 billion was up nearly 16% year over year, driven by the payer’s pharmacy benefit management arm IngenioRx and the return of the health insurance fee this year.
Anthem provided a premium credit to its commercial members of 10% to 15% but said it hasn’t seen premium payments drop, Pete Haytaian, president of the commercial and specialty business division, told investors. “Our collection rates actually look a lot more like a normalized environment pre-COVID,” he said.
Meanwhile in March, the Department of Justice filed a lawsuit against Anthem, alleging the payer did not correct inaccurate diagnosis codes and received millions in improper Medicare Advantage payments. Anthem has defended its business practices.