- Anthem on Wednesday reported operating revenue for 2019 grew nearly 13% year over year to just above $103 billion. For the fourth quarter, the number was up 16.4% to $27.1 billion, slightly above Wall Street expectations.
- The medical loss ratio for the fourth quarter was 89%, up from 86.8% in the prior year, as expected by the company, primarily due to the suspension of the health insurance tax last year. That came in above some analyst expectations, likely contributing to a drop in shares in morning trading Wednesday.
- Anthem met its goal of completing the accelerated launch of its pharmacy benefit management arm, Ingenio Rx, by Jan. 1, executives said on a call with investors. The acquisition of behavior health services network Beacon, which was expected to close in the fourth quarter, is now likely to be completed in the first quarter of this year.
Jefferies analysts David Windley and David Styblo in a note Wednesday morning called the earnings "disappointing on two fronts," namely the high MLR and a lower than expected 2020 earnings outlook.
A key aspect affecting the ratio is the health insurance tax. Payers have celebrated the repeal of the tax after this year, which was signed into law last month through a year-end spending bill. In its outlook for 2020, with the tax still in place, Anthem expects an MLR of 85.8%, higher than analysts had predicted.
The MLR was a hot topic for investors on the earnings call. Anthem executives attributed the full year and fourth quarter numbers to the flu season starting earlier than normal and therefore hitting the fourth quarter more than expected as well as more government business. In the fourth quarter, the payer saw a nearly 30% operating gain for government business to $583 million.
"It's largely the result of business mix, and I really can't emphasize enough how much the mix does change the MLR," CFO John Gallina said.
Anthem's medical enrollment grew slightly in 2019, up 2.7% to 41 million members. The growth was driven by risk enrollment, but was at the bottom of Anthem's guidance.
Medicare membership for the year was up 14.4% while Medicaid membership increased by 8.2%. Individual members rose by 4.4%.
On the managed care front, Anthem recently bought Medicaid plans from WellCare as that company sought to close its acquisition by Centene. Anthem gained nearly 300,000 members in Missouri and Nebraska through the deal. And in Kentucky, Anthem has filed a protest after losing out on the state's $7 billion Medicaid contracts.
Felicia Norwood, president of Anthem's government business division, told investors MA enrollment continues to shoot up, and the 2020 annual enrollment period showed "some of the strongest growth we've ever seen."
As it completed the PBM launch, Anthem transitioned 15 million people to the platform over the past eight months. Anthem CEO Gail Boudreaux called it a "key milestone in realization of strategy to integrate pharmacy with medical and behavioral health as part of whole person care."
Ingenio Rx was the main driver behind Anthem's fourth quarter growth in commercial and specialty business of nearly 70% year over year to $535 million. Executives said they see it as a growth accelerator for both commercial and government business.
The company's overall operating gain for the year was almost $6 billion, a 10% increase, and was $750 million for the fourth quarter.
Boudreaux boasted of Anthem's largest organic risk-based growth in more than a decade and said she expected another year of revenue growth, though she hinted at headwinds. "I'm pleased with our performance but we have much more work to do as we move into the new year," she said.