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Higher rates, membership fuel Anthem's quarterly profit


Anthem Inc. raised financial guidance for the rest of the year after the Indianapolis-based health insurer posted $865.2 million in profit, a 23.4% jump from the same period last year.

Premium rate hikes, large growth among its Medicaid health plans and lower medical claims all contributed significantly to Anthem's profitable quarter, the company said Wednesday. Earnings per share totaled $3.09, well above Wall Street's consensus prediction.

Anthem's medical-loss ratio, or the amount of premiums that go toward paying health care services and procedures, was 80.2% in the first quarter — down from 82.7% in the prior-year period. Anthem joins UnitedHealth Group Inc. and Aetna Inc. among the blue-chip insurers that said their medical costs and utilization trends have not increased at all so far this year. Their reports go against economic analyses that show healthcare spending, especially for hospital care, has gone up a lot in the past few months.

First-quarter revenue increased 7% to $18.9 billion. Commercial revenue declined 3.4% as more employers dropped their fully insured policies and became self-insured. Revenue related to Medicaid and Medicare made up for that shortfall, climbing 19.4% in the quarter.

Anthem said it was able to boost revenue and margins through “premium increases to cover overall cost trends and increased fees associated with healthcare reform”—the same wording from last quarter. But those rate hikes have drawn heightened scrutiny. California Insurance Commissioner Dave Jones excoriated Anthem this month, calling the insurer's premium increases for some California members “unjustified and unreasonable” after the state conducted an independent analysis.

Total membership increased 4.3% year over year, as more than 38.5 million people had an Anthem health plan as of March 31. Anthem's Medicaid plans grew the most, 25%, and now cover 5.6 million low-income Americans.

Cyber attack ignored

Anthem did not address the February cyber attack at all in its news release or on its call with investors. Almost 80 million former and current policyholders had personal information stolen by hackers. The data breach, the largest ever among health care organizations, could cost the company millions of dollars, and its cyber security insurance policy likely won't cover all damages.

In an accompanying Securities and Exchange Commission filing, Anthem said it will “continue to incur expenses” related to the cyber attack “in the foreseeable future,” and those expenses “may be significant.” No updates were given on pending investigations.

Anthem has about 900,000 members who bought plans through health care reform law's exchanges, and it may be in the market for more. Assurant said Tuesday it will sell off its health insurance division, which was heavily involved on the exchanges. When asked specifically about the Assurant Health situation, Anthem executives hinted that they are interested in any health plans that become available, and more insurers may be on the block in the future after Afforable Care Act risk provisions go away after 2016.

“From our perspective, we plan to be a participant in that membership as it becomes available,” Anthem Chief Financial Officer Wayne DeVeydt said.

Anthem expects earnings per share for the entire year will be at least $9.47, up from its previous estimate of $9.30.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.

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