- Anthem on Wednesday reported first quarter operating revenue increased by nearly 21% to $29.4 billion, driven by the launch of pharmacy benefit management arm IngenioRx, premium rate increases and membership growth. That beat Wall Street expectations for the quarter, which executives said was "largely unaffected" by the coronavirus pandemic.
- But as the payer evaluates further impact from the outbreak, it expects an unprecedented shift from a drop in commercial membership and increase in Medicaid and Affordable Care Act exchange enrollment as unemployment soars. Anthem is maintaining its 2020 earnings guidance but pulling all other full-year expectations in the wake of the pandemic.
- Anthem's medical loss ratio dipped slightly from 84.4% to 84.2%, mostly because of the return of the health insurance tax this year. The company expects second quarter MLR to be "well below historical levels," but is bracing for an increase in the figure for the second half of 2020 if elective procedures resume.
Like the rest of the industry, Anthem is modeling possible circumstances amid the intense uncertainty of the COVID-19 crisis. While payers are benefiting in the short term from deferred elective procedures, Anthem has suspended share repurchases and drawn on existing credit lines to prepare for the unknown future.
Anthem CFO John Gallina told investors on a Wednesday morning earnings call the company historically sees 30% to 40% of annual medical expense related to deferrable treatment but warned "there remains significant uncertainty around the shape and timing" of a recovery. "We are in uncharted territory, and the future may look markedly different from what anyone expects," he said.
The payer has noted a slight uptick in members using grace periods or payment plans to pay premiums. That figure is up to about 3% in April when it's typically at 0.5% to 1%, said Pete Haytaian, president of the commercial and specialty business division. That's in line with what rival UnitedHealthcare reported earlier this month.
Anthem has been increasing its Medicaid footprint and now operates plans in 23 states and the District of Columbia. It is first or second in market share in most of those areas. It has exchange plans in 14 states as well. Based on historical data, including from the recession about a decade ago, the payer expects 40% to 50% of those who lose employer coverage to move to Medicaid markets, and about 30% to the individual market, CEO Gail Boudreaux said.
So far, however, drops in commercial membership has been muted as many employers furlough employees instead of implementing layoffs, she said. Medical enrollment for the first quarter increased 3.2% year over year to 42.1 million members.
Boudreaux also pointed to an increase in telehealth, especially for behavioral services. Anthem has seen a 250% surge in virtual engagement through text and video visits. "This crisis has made clear that telehealth and virtual care will continue to be a key component of how care is delivered going forward," she said.
In its first quarter as a separately reporting segment, IngenioRx posted a $349 million operating gain. As Anthem relaxed early prescription refill limitations, there has been a spike in prescriptions this month that has helped performance, Gallina said.
Anthem shares were trading up slightly Wednesday morning on the release.