- Anthem beat Wall Street's third-quarter expectations on earnings and reported revenue of $31.2 billion, up 16.8% from the year prior, in results released Wednesday morning. Expenses, however, were up more than 22% year over year, leaving profit to plummet roughly 80%.
- Total medical membership jumped 4%, attributed to increases in Medicare and Medicaid rolls. Anthem CEO Gail Boudreaux said on the earnings call the overall membership trends are outpacing internal expectations.
- The payer also reported a $594 million payment in Q3 toward a federal antitrust settlement reached with Blue Cross Blue Shield plans that is still awaiting approval by a judge. Other terms include nixing the "best efforts" rule that required member plans to generate at least two-thirds of their annual revenue from Blues brands and allowing employers to request a second bid from a non-local Blues plan, Boudreaux said, adding "we don't see this changing our strategy."
Analysts pointed to Anthem's favorable membership mix changes toward fully-insured members and investment income increases as bright spots for the payer.
Jefferies analyst David Windley described the decrease in commercial losses compared to the second and first quarters as an "encouraging trend." SVB Leerink analysts said in a Wednesday morning note the company's "balanced business mix and strategy remains underappreciated at current levels."
Executives said visit volumes were rebounding and hit about 95% of baseline in Q3. CFO John Gallina said outpatient surgery was returning the fastest but ER volumes were still below baseline and that is expected "to continue for a while."
Anthem posted a medical loss ratio of 86.8%, down from 87.2% in the prior-year period, due to deferred care from COVID-19 and the return of the health insurer fee this year. Gallina said the fourth quarter MLR is expected to be 300 to 500 basis points above the seasonal baseline as members continue to seek care put off earlier this year.
He cited the permanent repeal of the fee as a tailwind going into the fourth quarter, along with growth in the pharmacy benefit management arm IngenioRx and increases in Medicare Advantage membership.
MA enrollment grew nearly 18% year over year, but Boudreaux said Anthem's star ratings performance in those plans was disappointing, particularly among pharmacy plans. "We are intensely focused on our star ratings with significant improvement expected over next year," she said.
In March, the Department of Justice said it was suing Anthem, alleging the payer received hundred of million of dollars in improper MA payments after failing to correct inaccurate diagnosis codes. Anthem defended its practices.
Asked about how management was viewing upcoming costs of COVID-19 therapies and a potential vaccine, Boudreaux said Anthem will look to follow CMS' guidance. "We've modeled a lot of scenarios into our pricing," she said. "There's a lot of variables, obviously, related to vaccines."
The antitrust settlement stems from a class action lawsuit that alleged Blues plans conspired to avoid competing with each other and drive up member costs. The Wall Street Journal reported last month the full amount of the payout is about $2.7 billion.
Anthem maintained its earnings guidance of greater than $22.30 per share but continued to decline to offer other guidance for the full year, citing the uncertainty of the pandemic. Executives said they continue to expect EPS growth in the range of 12% to 15% next year, but are eying the lower end of the range due to the volatile environment.