Dive Brief:
- It's been a rough few weeks for Anthem with news of a second-quarter profit drop of more than 9% following on the heels of the U.S. Justice Department's recent decision to try to block the insurer's merger with Cigna as well as the merger between Aetna and Humana.
- Anthem attributed increased medical spending to higher costs from its ACA plans and Medicaid business, with 84.2 cents of every premium fdollar going to medical care vs. 82.1 cents a year ago, Bloomberg reported.
- The company also reduced its earnings projections for the rest of 2016.
Dive Insight:
While Anthem now projects continued losses on its ACA policies for 2016, premium increases could solve the problem in 2017
The insurer also focused its earnings call on its continued efforts to win approval for its pending merger with Cigna, which now depends on a court battle with the DOJ over arguments the deal would be anti-competitive and increase costs for consumers.
Anthem argued the deal would in fact be good for consumers. “Our acquisition of Cigna will help stabilize pricing in this volatile market, enabling Anthem to continue its commitment to the public exchanges,” Anthem President and CEO Joseph Swedish was quoted by Modern Healthcare.
If the deal fails to materialize it may prove a costly mistake. Expenses tied to the acquisition deal, not included in the adjusted earnings figure, contributed to Anthem's a 9.1% decline in net income.
"Our commitment to the pending Cigna acquisition remains as strong as ever and we believe this acquisition will further advance affordability and quality for our customers," Swedish said in a statement in response to its earnings report.
Anthem is the first of the four blocked insurers to respond to the DOJ's lawsuits, Bloomberg noted, having requested Monday to fast-track the case and set a trial for October.
It argued in court papers that by merging, the combined health insurance giant could provide a fortified marketplace presence that would counter the departures of other insurers, and allow it to enter markets in nine states where the companies are not operating separately.