Anthem posts positive Q2 earnings, suggests more ACA exits
Anthem announced second-quarter earnings on Wednesday that beat Wall Street’s target. The payer said it will raise its third-quarter dividend by 5 cents to 70 cents a share and its fiscal year 2017 adjusted earnings to $11.70 a share.
The second-quarter operating revenue, however, was less than the $22.28 billion expected by analysts. Anthem said net income for the second quarter was $855.3 million, compared to $780.6 million in the second quarter last year. Operating revenue increased to $22.2 billion, compared to $21.27 billion last year.
In other Anthem news, the payer said it might pull out of more Affordable Care Act (ACA) exchanges. Anthem offers ACA plans in 14 states, but may pull out of three in 2018. Anthem blamed the ACA market instability caused by the White House threatening to pull cost-sharing reduction (CSR) subsidies, which helps payers cover lower income Americans.
Anthem officials said the 4.3% increase in operating revenue in the second quarter was connected to premium rate increases and higher enrollments in local group insured, self-funded businesses, Medicaid and Medicare. “These increases were partially offset by the impact of the one-year waiver of the health insurance tax in 2017 and less favorable adjustments to the prior year risk adjustment estimates,” according to Anthem.
Anthem’s medical enrollment increased by 1.2% or about 468,000 members and totaled about 40.4 million members as of June 30, 2017. The enrollment gains were mostly because of the local group, individual and Medicare businesses. Anthem expects medical enrollment to grow between 300,000 and 500,000 members for the full year.
Anthem’s benefit expense ratio, also known as the medical loss ratio, increased from 84.2% in the second quarter of last year to 86.2% in the second quarter of this year. The company said that increase was also driven by the tax waiver and last year's risk adjustment estimates.
Announcing the second-quarter earnings, Joseph Swedish, president and chief executive officer at Anthem, said the largely positive results carry “forward our operating momentum.”
Meanwhile, the Anthem officials' announcement that the payer may pull out of three states isn’t surprising. The payer already said it planned to leave the Wisconsin and Indiana markets, but has now added Ohio to the list. President Donald Trump has threatened to stop CSR payments, which payers like Anthem have said will cause huge premium increases and more insurance companies dropping out of the exchanges.
While Anthem is looking to reduce its ACA exchanges footprint, another payer, Centene, is expanding its ACA offerings. Centene announced its second-quarter earnings on Tuesday, which included growth thanks in part to the ACA exchanges.