Insurer Anthem warns of higher non-COVID-19 costs in coming quarters

FILE PHOTO: The office building of health insurer Anthem is seen in Newbury Park, California
FILE PHOTO: The office building of health insurer Anthem is seen in Newbury Park, California February 5, 2015. REUTERS/Gus Ruelas

April 21, 2021

By Manojna Maddipatla and Mrinalika Roy

(Reuters) -Anthem Inc on Wednesday warned of higher medical costs in the coming quarters due to a sooner-than-anticipated rebound in demand for non-COVID-19 healthcare services as more Americans get vaccinated.

For much of last year when the pandemic was at its peak, health insurers benefited from lower patient use of elective, non-COVID healthcare services.

“Given a faster rollout of the vaccine, we expect non-COVID utilization to rebound sooner, and we now expect to absorb higher COVID vaccination administration costs during the second quarter,” Anthem Chief Financial Officer John Gallina said.

Shares of the company were down about 0.5% at $380.30.

“The expected return of care utilization is somewhat optimistic. We continue to see variable inoculation rates for COVID-19 across specific markets, as well as hesitancy from consumers to return to in-person care,” Forrester analyst Arielle Trzcinski said.

Anthem’s comments were made during a post-earnings conference call after the company reported quarterly profit that beat estimates and raised its full-year profit outlook.

The raise follows a similar move by larger rival UnitedHealth, which said last week it saw a decline in COVID-19 related expenses during February and March as U.S. vaccination efforts helped ease case burden.

For 2021, Anthem expects adjusted net profit of more than $25.10 per share, up from its previous forecast of over $24.50 per share.

Gallina said the company’s forecast assumes a negative impact from the potential for a prolonged fourth wave of COVID-19 and pent-up demand for healthcare services that were delayed by patients throughout the pandemic.

Even though Anthem’s outlook assumes COVID-19 related costs of about $600 million, it stuck to its long-term annual target of 12% to 15% growth in adjusted profit.

Excluding items, Anthem earned $7.01 per share in the quarter ended March 31, compared with analysts’ average estimate of $6.51.

(Reporting by Manojna Maddipatla in Bengaluru; Editing by Shinjini Ganguli)