Higher Interest Rates Help Anthem

 Commentary  April 21, 2022 at 07:44 AM  Share & Print

 

What You Need to Know

  • Medicare Advantage enrollment was higher.

  • The number of Medicare supplement insureds was up a little.

  • The number of life and disability enrollees was down.

Health insurers have much smaller bond portfolios than life insurance and annuity issuers — but rising interest rates are still helping Anthem.

John Gallina, the Indianapolis-based health insurance giant’s chief financial officer, talked about the effects of efforts by the Federal Reserve Board to push rates higher Wednesday, on a conference call with securities analysts.

Gallina pointed out that Anthem has $35 billion in bonds, notes and other debt securities in its investment portfolio.

“About 30% of that $35 billion is in variable-rate debt,” Gallina said.

Rising interest rates give an immediate boost to returns on the $10 billion in variable-rate debt, he said.

Anthem also owes $23 billion, but less than $2.3 billion of its debt has variable rates.

“So, the rising interest rates are actually a net good guy for us,” Gallina said. “What these interest rates do is give us a lot more flexibility in terms of decisions that we can make.”

The Earnings

Anthem held the conference call to go over its earnings for the first quarter of this year, which ended March 31.

Anthem is reporting $1.8 billion in net income for the latest quarter on $38 billion in revenue, up from $1.7 billion in net income on $33 billion in revenue for the first quarter of 2021.

Anthem ended the quarter providing or administering health coverage for 47 million people, or 7.5% more than it was covering a year earlier.

Here’s what happened to the number of people covered by specific types of Anthem health coverage products between the first quarter of 2021 and the latest quarter:

  • Individual commercial: 818,000 (up from 731,000)

  • Medicare Advantage: 1.9 million (up from 1.5 million)

  • Medicare supplement plans: 939,000 (up from 930,000)

  • Self-funded employer plans: 27 million (up from 26 million)

  • Fully insured employer plans: 4 million (up from 3.8 million)

The number of life and disability members fell 1.8%, to 4.7 million.

Enrollment in the company’s dental plans increased 0.8%, to 6.6 million, and enrollment in dental plans that Anthem administers, rather than insures, increased 6.7%, to 1.6 million.

The ratio of medical claims to premiums increased, as the health care system continued to adjust to the COVID-19 pandemic and patients began getting normal levels of care for conditions other than COVID-19.

The COVID-19 omicron variant case surge added to claims early in the quarter.

But the typical severity level of the new COVID-19 cases was relatively low, and predictions that enrollees would rush to take advantage of new, free test kit benefits and stockpile kits failed to come true, Gallina said.

The result was the claims were above normal levels but lower than some had feared.


European Compliance Association

European Compliance Association

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