Anthem third-quarter profit buoyed by higher membership, premiums
(Updated at 1 p.m. ET)
National health insurer Anthem's profit ballooned by 20.9% to $746.9 million in the third quarter of 2017, helped by higher premiums and membership growth.
Having stepped away from the Affordable Care Act individual insurance exchanges, Indianapolis-based Anthem is focusing on more profitable insurance lines, its CEO Joseph Swedish said Wednesday during conference call to announce third-quarter financial results.
Like other health plans, Anthem has its eye on the Medicare Advantage market—a lucrative product for insurers that's unaffected by the uncertainty plaguing the individual market.
Late Tuesday, Anthem announced that it is acquiring America's 1st Choice, a private for-profit Advantage plan based in Florida with about 130,000 members. It's the second Florida-based Advantage plan Anthem has scooped up in the last couple of months. In September, Anthem struck a deal to buy HealthSun, which serves 40,000 members.
Anthem serves a total 1.5 million Medicare Advantage members, an increase of 4.2% over the same time last year.
Meanwhile, Anthem announced last week that it is starting its own pharmacy benefit manager, IngenioRx, in the wake of its fallout with Express Scripts. The new PBM will net more than $4 billion in gross savings annually, Anthem said.
Anthem has largely cut ties with the insurance exchanges, because of financial losses and uncertainty in the future of cost-sharing reduction subsidies. The Trump administration recently said it is ending those subsidies, which help lower-income Americans with their out-of-pocket healthcare costs.
The insurer this year serves about 900,000 exchange members, but it expects membership to decline by 70% in 2018, Swedish said during the conference call. Anthem is pulling out of 87 of the 143 exchange rating regions across 14 states that it participates in this year, remaining in only those where it can make a profit.
"Marketplace instability created a variety of uncertainties, including CSR subsidy funding. The uncertainty around CSR subsidy funding was an important factor as we engaged in constructive dialogue with state regulators and evaluated the appropriate levels of participation," Swedish said.
He added that if the level of uncertainty in the marketplace subsides, Anthem would have "increased confidence" to re-enter some areas in 2019.
Even without CSR funding, Anthem expects its ACA business to break even in 2017 and be slightly profitable in 2018.
In the third quarter, Anthem reported revenue of $22.4 billion, up 4.8% from the same quarter a year ago.
Membership at the end of the quarter totaled 40.3 million, a slight increase from 39.9 million at the same time last year. The bump in membership was driven largely by new local employer customers, though the company also added Medicare and Medicaid members. It lost membership in its individual insurance business, as expected, and its national employer business.
The benefit expense ratio was 87% for the quarter, up from 85.5% a year ago. Anthem attributed the higher expense ratio to the one-year waiver of the health insurance tax in 2017.
Correction: This story has been updated to reflect Anthem's correct third-quarter 2017 profit.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.