Low medical costs and growth in Medicaid membership raised the second-quarter bottom line at Anthem. Now, the Indianapolis-based health insurer will turn its focus on getting approval for its $54.2 billion takeover of rival Cigna Corp.
Anthem's net income jumped 17.5% from the second quarter last year to $859.1 million, according to financial statements released Wednesday. Overall membership, totaling 38.5 million, did not increase from this year's first quarter. Anthem added more Medicaid beneficiaries, one of its strongest growing segments since it acquired Amerigroup, but it continued to lose employer-based and individual exchange members.
Profitability grew because Anthem paid out a lower percentage to cover medical costs. Anthem's medical-loss ratio in the second quarter was 82.1%, down from 82.7% in the same period a year ago. Even though national healthcare spending is on the rise, insurers like Anthem have not recorded large jumps, if any increase at all, in medical benefit costs. More people are being shifted to health plans with higher deductibles, coinsurance and copayments, which has put more of the medical tab on individual consumers.
If Anthem's proposed acquisition of Cigna goes through, Anthem would become the largest health insurer in the country by membership with 53 million covered lives. Anthem and Cigna signed a definitive agreement last week, whereby Anthem will pay more than $48 billion and assume Cigna's debt.
Antitrust regulators will likely scrutinize the deal closely. The combined company would have sizable market power in the large-employer group in several states, such as Georgia, Indiana, New Hampshire and Virginia. Anthem also has to get clearance from the Blue Cross and Blue Shield Association and shareholders from each company. The second-quarter earnings report did not immediately address the Cigna transaction.
Anthem also did not address the data breach that occurred earlier this year and has mostly remained under the radar for the past couple months. Hackers stole the personal information of almost 80 million Anthem members and other Blue Cross and Blue Shield members, but medical data reportedly were not compromised.
Anthem is working with the FBI on an investigation, but no updates have been given on the source of the cyberattack. Costs of the breach have also not been disclosed but could be "significant," according to the insurer.