5 Quick Anthem Earnings Highlights for Agents

This quarter, Medicaid is the problem child

Joseph Swedish (Photo: Anthem) Joseph Swedish (Photo: Anthem)

Executives at Anthem Inc. might be warming up, a little, to ordinary commercial individual and group commercial health insurance products.

A modest revival of interest in commercial products surfaced today during a conference call Anthem held with securities analysts to go over first-quarter earnings.

(Related: UnitedHealth Bets on Medicare, Medicaid After ACA Exchange Exit)

Anthem streamed the call live on the web and posted a recording on its website.

The Indianapolis-based health insurance giant reported $1 billion in net income for the quarter on $22 billion in revenue, up from $703 million in net income on $20 billion in revenue for the first quarter of 2016.

The company ended the quarter providing or administering medical coverage for about 41 million people, or 2.6% more people than it was covering a year earlier.

What Anthem thinks about the commercial health insurance market or Medicare plans could have an obvious effect on agents and advisors who help clients with those products.

For any financial advisors who help early retirees use annuities or other mechanisms to fund post-retirement costs, Anthem's decisions could affect how much those early retirees have to pay for individual commercial health coverage, or whether they can get any kind of major medical coverage at all.

Here's a look at some of what Anthem executives said about the results during the conference call.

Zipped mouth (Image: Thinkstock)

1. Anthem executives still don't talk to you.

If executives used the word "agent," "broker," "consultant" or "distribution" team during the conference call, we missed it.

(Related: Health Insurance Innovations Doubles 2016 Commission Spending)

Executives did attribute their strong first-quarter commercial health insurance performance to successful efforts to collaborate with health care providers.

In the earnings release, Anthem reported that it spent $349 million on selling expenses during the quarter. Selling expense was 0.4% lower than in the year-earlier quarter.

Beating the competition (Image: Thinkstock)

2. The company's commercial health insurance business looks better, overall.

Anthem executives said they were happy with the performance of their commercial health operations in the first quarter. 

(Related: Actuary Sizes Up 2018 Individual Health Picture)

Enrollment in big, national account plans stood at 13 million at the end of the quarter. That was down slightly, about 0.1%, from the year-earlier total.

Enrollment in local groups increased 3.3%, to 16 million.

John Gallina, Anthem's chief financial officer, said Anthem increased local group sales by offering products and holding down administrative costs.

The company's recent strength in the local group market and in fully insured group plans "has to do with capitalizing on a shrinking marketplace" and taking share away from competitors, Gallina said.

HealthCare.gov (Image: CMS)

3. Even the individual major medical business looks respectable.

Anthem is the last, or one of the last, players in in many states' individual major medical markets this year, and its overall individual commercial enrollment increased to 1.9 million by the end of the quarter.

(Related: 5 Kisses CMS Is Blowing at State Insurance Regulators)

Individual enrollment was up 13% from the total Anthem recorded a year earlier.

The individual major medical category of business was the fast-growing category Anthem included in its results.

About 1.1 million of the current individual major medical enrollees came in through the Affordable Care Act individual exchange system; about 300,000 have old coverage written before all ACA rules took effect; and about 400,000 have ACA-compliant coverage purchased outside the ACA exchange system.

At this point, the individual major medical ratio of claims to revenue is a little worse than Anthem had hoped, but the ratio is much better than it was in the first quarter of 2016, executives said.

The company is hoping the individual major medical unit will break even this year. 

Iowa flag on a barn (Photo: Thinkstock)

4. Anthem executives are complaining about the company's Iowa Medicaid plan business.

Iowa made major changes to its Medicaid program that have reminded participating insurers that government-run health coverage programs can have their faults, too.

(Related: Blue Cross Carrier to End Iowa Individual Sales in 2018)

Joseph Swedish, Anthem's chairman, said Medicaid claims in Iowa have been significantly higher than expected.

"We need to receive actuarially justified rates in the rate renewal process," Swedish said of the Iowa Medicaid program.

2018 (Image: iStock)

5. Anthem executives are still open to participating in the individual commercial market in 2018.

Swedish said he likes the package of individual market and ACA exchange changes that the Centers for Medicare & Medicaid Services recently completed.

Those changes should help stabilize the market, Swedish said.

To truly stabilize the market, policymakers in Washington must agree to continue to fund the ACA risk-adjustment program and eliminate the health insurance tax on insurers, Swedish said.

Eliminating the cost-sharing reduction subsidy could increase 2018 premiums by 20%, and keeping the health insurance tax in place could add another 3% to 5%, Swedish said.

Anthem has warned regulators that it may have to adjust its filings as the year goes on.

Anthem could still reduce service areas and product menus in 2018, or even withdraw from markets, Swedish said.

But Swedish seemed to be open to the possibility that Anthem could continue to sell individual major medical products in 2018.

--- Read Trump Threatens Health Subsidies to Poor to Force Talks on ThinkAdvisor.

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