The COVID-19 pandemic and changes in federal laws bit into Anthem Inc.’s earnings in the fourth quarter of 2020.
The Indianapolis-based health insurer is reporting $551 million in net income for the quarter on $32 billion in revenue, down from $934 million in net income on $27 billion in revenue for the fourth quarter of 2019.
Earlier in the year, COVID-19 led to a sharp reduction in use of ordinary health care, and that helped increase U.S. health insurers’ net income, in spite of the costs associated with having many employees work from home, and aside from what insurers like Anthem spent on COVID-19 testing and expanding telehealth coverage.
In the fourth quarter, higher COVID-19 claims and a one-year Medicare physician reimbursement boost embedded in the Consolidated Appropriations Act 2021 (CAA 2021) cut net income, according to Gail Boudreaux, Anthem’s chief executive officer.
“Importantly, these factors are transient and should diminish as we move into 2022,” Boudreaux said Wednesday, during a conference call Anthem held to go over company earnings with securities analysts.
But Anthem executives indicated that COVID-19 care costs are significant.
John Gallina, the company’s chief financial officer, noted that, overall, the company’s ratio of medical claims to revenue, or medical cost ratio, actually fell to 88.9% during the fourth quarter, from 89% in the year-earlier quarter.
Use of care not related to COVID-19 was somewhat lower than expected, Gallina said.
But “COVID–related costs accelerated during the quarter above expectations,” Gallina said.
Later during the call, Gallina said all expected 2021 COVID-19-related expenses combined, including the temporary CAA 2021 Medicare physician reimbursement rate increase, will add up to “several billions of dollars.”
After subtracting various types of revenue increases and cost reductions related to the pandemic, the net effect of the pandemic could reduce Anthem’s 2021 net earnings by about $600 million, Gallina predicted.
Boudreaux and Gallina said that, overall, Anthem’s business has been performing well.
Boudreaux said Medicare Advantage enrollment was 18% higher at the end of 2020 than at the end of 2019.
For 2021, “our [annual election period] performance is in line with expectations, and we expect another year of double-digit growth,” Boudreaux said.