- Anthem's medical costs during the third quarter beat Wall Street expectations despite the wave of COVID-19 hospitalizations and cases that were fueled by the delta variant during the quarter. The medical cost results are likely to ease investor fears, SVB Leerink analysts said in a Wednesday note.
- On top of that, Anthem increased medical membership by nearly 6% over the prior-year quarter, ending the period with 45.1 million members. The largest membership gains were recorded in its government book of business, a continuing trend throughout the pandemic.
- Anthem generated a $1.5 billion profit for the third quarter, a dramatic leap from the prior-year period when net income was $222 million. The payer again hiked its outlook for the remainder of the year on the results released Wednesday.
Utilization trends and medical costs remain under close watch by insurers and providers, especially after the delta variant caused a significant spike in COVID-19 hospitalizations and cases throughout the third quarter, causing some providers to once again delay non-emergency procedures.
But Anthem seemed to have a handle on medical costs during the third quarter despite the pressures.
Anthem reported a benefit expense ratio of 87.7% for the quarter, an increase from the second quarter, but still well below the 88.4% analysts had expected. The ratio is an important measure of how much insurers spend on care in relation to the premium revenue they bring in.
Last year, as the pandemic caused many people to defer care — either due to lockdowns or personal preference — insurers experienced deflated benefit ratios as the widespread deferred care tended to offset COVID-19 expenses.
That led to worries about how quickly patients would return after putting off care and the impact that would have on insurers' financial results.
Anthem had expected utilization challenges throughout the back half of the year due to the pandemic. During the previous quarterly earnings call, executives braced their expectations and said they had a more "cautious" view of the remaining two quarters of the year in light of the variants and slow uptake of vaccines.
On Wednesday's earnings call, executives warned investors that the fourth quarter of the year typically has a higher benefits ratio.
Government programs continue to be the driver behind Anthem's robust membership growth. The jump in membership is due in part to federal policy decisions that have allowed people to retain Medicaid coverage throughout the duration of the COVID-19 public health emergency.
In just the third quarter alone, Anthem reported a 21% increase in Medicaid membership compared with the third quarter of 2020. Membership gains have been just as strong in its Medicare book of business with a 19% increase compared with the prior-year quarter.
Growth in its commercial segment has not been as strong as employer-sponsored plans have experienced more turbulence due to the pressures the pandemic put on employment.
Still, there is a bright spot, according to SVB Leerink analysts. Anthem "experienced growth in its [commercial] risk membership for the first time since the start of the pandemic," they said in the note.
UnitedHealthcare reported membership growth in its commercial, Medicaid and Medicare Advantage business lines as well. The Minnetonka, Minnesota-based firm also raised its full-year guidance as it beat analysts' expectations for the quarter.