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Inside Anthem’s Commercial Enrollments in 1Q16

Analysts Like Anthem after 1Q16, and Here's Why

(Continued from Prior Part)

Commercial enrollments

Anthem’s (ANTM) Commercial and Specialty business earned revenues worth about $9.5 billion in 1Q16, which represents a YoY (year-over-year) rise of about 1.5%. The division’s operating income came in at about $1.3 billion in 1Q16, which represents a YoY rise of about 2.1%.

The company has been actively involved in several cost efficiency initiatives, which resulted in lower administrative costs in 1Q16. The rise in self-insured enrollments in the national and local group segments of commercial enrollments resulted in a rise in operating gains for Anthem’s Commercial and Specialty segment.

The segment’s operating margins were partially offset by higher medical costs and declines in fully insured memberships from the local group business. But the majority of these fully insured members are from California and have switched to nonprofit health insurers on account of cheaper prices. (To know more about Anthem’s commercial business, check out “Anthem Enjoys Steady Commercial Business.”)

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The above graph shows that Anthem’s commercial enrollments rose by about 2.1 %, from 29.9 million in 1Q15 to 30.6 million in 1Q16. This growth is attributed to increases in enrollments in the national and individual markets by 658,000 and 3,000, respectively.

Self-insured enrollments

Commercial enrollments rose sequentially by about 880,000 in 1Q16. Self-insured enrollments accounted for a major portion of this growth. The category witnessed a sequential rise of 3.8% or 906,000 members in 1Q16.

Meanwhile, patient switching from the fully insured to the self-insured category and increases in BlueCard enrollments boosted Anthem’s self-insured enrollments. Anthem is thus expected to pose a strong competition to peers such as UnitedHealth Group (UNH), Cigna (CI), and Aetna (AET) in the commercial enrollment business. (To know more about self-insured enrollments, check out “Shift to Self-Insurance Plans Affects Health Insurance Stocks.”)

National membership

In 1Q16, Anthem’s total national enrollments represented 44% of the company’s total commercial membership and 34% of Anthem’s total membership. The company’s total national membership increased by 5.1%, from 12.8 million in 1Q15 to 13.5 million in 1Q16. National membership is further classified into national accounts and BlueCard members.

In 1Q16, Anthem managed to win some new accounts in the national segment, which are expected to add to the company’s membership in 2016 and 2017.

If Anthem manages to sustain its growth rate for its commercial business in future quarters, it will boost the company’s share prices as well as those of the iShares US Healthcare ETF (IYH). Anthem makes up about 1.3% of IYH’s total portfolio holdings.

Now let’s analyze the performance of Anthem’s government-sponsored business in 1Q16.

Continue to Next Part

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