Anthem reported a 41% year-over-year drop in fourth quarter profits for 2020, with increased COVID-19 costs and a surge in patients seeking delayed care bringing profits to $551 million.
The Indianapolis-based insurer, which operates Blue Cross and Blue Shield plans in 14 states, reported $4.6 billion in profit at the end of 2020 on Dec.31, a slight dip compared to the $4.8 billion it reported in 2019. At the end of the fourth quarter, Anthem reported a medical loss ratio of 88.9%.
Anthem was hit with a $250 million Medicaid claw back expense at the end of 2020, bringing its total Medicaid risk-sharing payments to $650 million for the year. But even with the higher-than-expected clawback costs, CEO Gail Boudreaux said Anthem still met its Medicaid membership goals for the year.
“We had strong organic growth in Medicaid aided by a pause on reverification and new strategic offerings in Nebraska and Missouri,” Boudreaux said.
Government plans proved to be a bright spot for Anthem in 2020.
The company’s total membership reached 42.9 million for the year, up 1.9 million members from 2019, and with Medicaid and Medicare plans driving the lion’s share of growth. In the fourth quarter, 300,000 more people signed on to the company’s Medicaid plans, bringing total membership for the plan up 21% year over year to 8.8 million people. The company also counted 2.3 million people as Medicare customers, up 11% year over year.
As the COVID-19 pandemic continued to wreak economic havoc on the nation’s economy, membership among the company’s commercial plans remained essentially flat, with Anthem’s commercial enrollees reaching 30 million by the end of 2020.
Operating revenue was $31.5 billion in the fourth quarter of 2020, up 16% from $27.1 billion reported during the same time in 2019, with the early receipt of some payments and growth in Medicare and Medicaid premium revenue because of the return of the health insurance tax. Total revenue for the year reached $121.9 billion, up 17% year over year from $104.2 billion.
“It is clear we’re still in the depths of a global pandemic,” Chief Financial Officer John Gallina said.
In 2021, Anthem expects Medicaid membership to continue to drive growth, particularly after acting HHS Secretary Norris Cochran’s letter on Tuesday saying that the public health emergency is expected to continue through the year. Gallina said he expects North Carolina’s new Medicaid program and a hold on redeterminations later this year will boost membership in the state by double-digits.
Going forward, Anthem expects total membership to reach up to 44.7 million for the year. The company also expects to grow operating revenue of $135.1 billion in 2021, and earnings per share to reach $24.50, with COVID-19 costs continuing cutting into its bottom line.
Gallina expects coronavirus testing, vaccination and other pandemic-related costs to reach $600 million in 2021. An increase in Medicaid physician rates, the sequestration and the passing of the consolidated appropriation bill will chop $0.50 off its individual share price, he added. Payment deferrals that were allowed under the CARES Act will also end in 2021, negatively impacting the company’s cash flow.
Anthem struggled to price some physician visits appropriately as more providers didn’t include risk codes during the quarter, Gallina said.
“We do believe there is pent-up demand in system, we do believe there will be a change of higher acuity when folks get care, most pronounced in the Medicare line of business,” Gallina said. “The question is not if those will happen, because we do believe they will happen, the question is to what extent.”
A new administration has also brought some uncertainty to Anthem’s business. President Joe Biden has flouted plans to require insurers to foot the bill for COVID-19 testing for employees and students. This would represent a break from tradition, Boudreaux said, since employers generally pay for things like flu vaccines for employees, and states usually pay for public health needs. Paying for additional testing is not in the company’s guidance.
But, the Biden administration does represent a bright spot for the company’s exchange business, according to Pete Haytian, president of the company’s government business division. Anthem expanded into 15 new counties in individual markets in 2021.
“The new administration looks like they’re going to promote and prop up the ACA business,” Haytian said. “We just heard this week we’ll likely see an extension to open enrollment.”