Dive Brief:
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Anthem’s revenues grew nearly 6% year-over-year to $89.1 billion in the fourth quarter of 2017, the company said during its earnings call Wednesday.
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Medical enrollment increased by 325,000 members in 2017, finishing with 40.2 million members. That was an increase of 0.8%.
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The payer said it expects its full-year 2018 net income to exceed $14.28 per share. Full-year adjusted net income is expected to exceed $15 per share, which is more than 24% growth compared to 2017 adjusted net income per share.
Dive Insight:
Anthem President and CEO Gail K. Boudreaux, who took over the role two months ago, said the fourth-quarter results were above expectations. Anthem said the positive fourth quarter and 2017 financial results reflect “a continued focus on improving execution while also funding investments.”
Operating revenue increased 4.5% to $22.4 billion in the fourth quarter. Anthem said that is connected to premium rate increases to “cover overall cost trends across our business,” as well as higher enrollments in some areas, such as Medicare.
Anthem officials briefly touched upon the company bringing its pharmacy benefit manager business in-house. Anthem said in October it is dropping Express Scripts as its PBM. It's also suing the company for $15 billion because the PBM reportedly reaped “an obscene profit windfall” from drug manufacturers. Anthem said those savings weren't passed on.
The company expects significant savings from the PBM business, amounting to about $4 billion once the migration is complete in 2021. Boudreaux listed three drivers for Anthem's PBM going forward: success in new Rx-only RFPs, increased penetration rate in the existing medical book of business and becoming the PBM for other payers.
Regarding membership, commercial and specialty business enrollment increased by 278,000 medical members. Self-funded and fully-insured local group business growth partially offset declines in membership in the national and individual businesses.
Anthem also saw 47,000 more members in its government business as it experienced growth in Medicare Advantage (MA), which partially offset a decline in Medicaid enrollment.
However, Boudreaux said Anthem sees potential in Medicaid as states increasingly turn to private payers to better manage healthcare and control costs. In addition to its own Medicaid offerings, Anthem has partnered with other payers, including Blues, to offer Medicaid.
For the year, Anthem gained 68,000 MA members and now has 702,000 members. That was a nearly 12% increase for the year. Boudreaux said Anthem’s MA growth rate outpaced the growth of the overall MA market. She added that Anthem has lagged behind others traditionally in the MA market, but the company is looking to expand in the coming years, with a goal toward low to middle double-digit growth rates.
That emphasis on MA was evident in its purchase of HealthSun and its planned purchase of America’s 1st Choice, two Florida-based MA payers. The deals help Anthem expand its MA footprint in Florida and will give the company two five-star plans in the Sunshine State.
The HealthSun deal brought 40,000 MA members to Anthem, as well as 19 care centers that will help the payer care for chronically ill members and dual eligibles. Boudreaux said the 1st Choice deal should close in the first quarter. The two companies will bring 170,000 new MA members in Florida, putting Anthem's MA membership there to 220,000 members.
Regarding the recent tax overhaul that cut the corporate rate, Anthem expects a net benefit of about $2 per share after adjusting for expected premium reductions and funding incremental investments in technology. The tax cut savings will go toward improving the medical loss ratio and returning money to customers (one-quarter), investments (one-quarter) and shareholders (one-half).
Looking ahead to 2018, Boudreaux said Anthem experts enrollment to be flat to down by 200,000 members. This is partially because of Anthem pulling out of many Affordable Care Act exchanges in 2018. The company expects about 950,000 fewer members in the ACA/individual market this year.
Editors note: This story has been updated to include details on the PBM business.