Elevance Health Wednesday reported nearly $1.8 billion in first quarter net income as costs continued to be a drag on earnings of the nation’s second-largest health insurance company.
Elevance, which is the nation’s second-largest health insurer behind UnitedHealth Group’s UnitedHealthcare, is best known for its operation of Anthem brand Blue Cross and Blue Shield plans in 14 states. In addition, Elevance manages Medicaid via contracts with multiple states and also sells individual coverage under the Affordable Care Act, also known as Obamacare. The company also has a growing Carelon healthcare services business.
Like many of its rival health insurers, the company has been battling rising medical expenses from customers in its health plans. Wednesday’s results reflected costs that are still up with the company’s benefit expense ratio, which is the percentage of premium revenue that goes toward medical costs, eclipsing 86%.
“The benefit expense ratio was 86.8 percent, an increase of 40 basis points, reflecting expected elevated medical cost trend in our Medicaid business, partially offset by improved performance in Medicare,” Elevance Health said in its first quarter earnings statement.
Health insurers typically want that benefit expense ratio in the mid to low 80s but that’s been largely unachievable for most health insurers for the last year or so in part because Americans, particularly older adults, have a pent up demand for healthcare following the Covid-19 pandemic when many patients delayed treatment. Costs have continued to surge into this year, insurers have been reporting.
Still, Elevance raised its annual adjusted diluted earnings per share guidance to “at least $26.75,” saying the move was “supported by underlying business strength, actions to reduce medical costs, and increased visibility.” And the company’s earnings were ahead of Wall Street analysts’ expectations.
“Our first quarter results exceeded expectations, reflecting underlying business strength and improving claims experience,” Elevance chief executive Gail K. Boudreaux said. “We are raising our full-year adjusted EPS guidance, supported by
greater visibility into the balance of the year. Our actions are driving more consistent performance and position Elevance Health for continued improvement over time.”
Net income nearly 17% to $1.76 billion, or $8 a share, in the first quarter ended March 31, compared to $2.18 billion, or $9.61, in the year-ago period. Total revenues were up 2.6% to $50.18 billion.
Elevance said its operating revenue was up 1.5% to $49.5 billion in the first quarter “driven by higher premium yields in our health benefits segment and growth in CarelonRx product revenue, partially offset by anticipated declines in our Medicare Advantage, Medicaid, and Employer Group risk membership.”
Elevance ended the first quarter with 45.4 million health plan members, which increased by less than 1%, or 186,000, from the end of last year. The company said the growth was “driven by expansion of our commercial fee-based membership, partially offset by anticipated reductions in its Medicare Advantage and employer group risk membership as we took disciplined action to reposition these businesses for sustainable performance.”
Meanwhile, the company’s Carelon health services business, which includes the pharmacy benefit management company CarelonRx, continues to grow. Operating revenue rose nearly 8%, or $1.3 billion, to $18 billion driven by the “scaling of Carelon Services risk-based solutions and CarelonRx product revenue,” the company said.
