Anthem Sees Enrollment Rising in 2016 as Medical Costs Increase

Updated on
  • Full-year 2015 adjusted EPS of $10.16 matches Jan. 12 outlook
  • Medical costs may rise 7.5% in 2016, more than last year

Anthem Misses 4Q Profit on Rising Medical Payouts

Anthem Inc., which operates health insurance plans under the Blue Cross and Blue Shield brand, said its number of customers will increase this year and medical costs will probably rise more than they did in 2015.

The insurer reported fourth-quarter earnings Wednesday that fell short of analysts’ estimates, and blamed the miss on the timing of earnings and share repurchases. Full-year 2015 adjusted profit of $10.16 a share matched a preliminary estimate the company gave on Jan. 12.

Enrollment may rise to as many as 39 million people by the end of 2016, from 38.6 million on Dec. 31, the Indianapolis-based insurer said in a statement. President Barack Obama’s health-care overhaul has helped add customers by requiring every American to buy coverage, and providing many with subsidies. 

Yet those customers haven’t always been profitable. Anthem, which agreed to buy Cigna Corp. for about $48 billion in July, has said its margins are narrower than it expected in the Affordable Care Act’s exchanges.

Anthem spent 87 cents of every premium dollar it took in on medical claims in the fourth quarter, up from 84.5 percent a year earlier. Medical costs were higher than expected in Anthem’s individual and local group business, which includes ACA plans, the insurer said.

Anthem said that underlying medical costs will probably increase by about 7 percent to 7.5 percent in the company’s local group business in 2016. The increase was more gradual in 2015, at about 6.5 percent.

The company also said that:

  • Fourth-quarter adjusted net income was $1.14 per share, missing analysts’ estimates by 4 cents. The company had provided preliminary results and outlook on Jan. 12
  • 2016 operating earnings will exceed $10.80 a share this year, up from $10.16 in 2015. That confirms an estimate by Anthem from Jan. 12
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