Anthem sees more individuals choosing govt plans as virus hits job market

One of America’s largest health insurers, Anthem Inc. (ANTM) stated on Wednesday that the pandemic could cause a major shift in business mix. Due to high rates of unemployment across industries, individuals are compelled to depart from employer-sponsored coverage and avail of Medicaid or ObamaCare instead

Employer-sponsored health insurance are more profitable for insurance firms. Drop in registrations can affect their profit margins and may result to a profit squeeze.

“Thus far, we have seen a slight uptick in the Medicaid enrollment as a result of states temporarily suspending reverification efforts and limited changes in our commercial business,” John Gallina, the Chief Financial Officer of Anthem, said on a post-earnings call.

“As time goes on, we expect a more significant shift of commercial group members to the Medicaid and the ACA marketplace.”

Since the 2008 financial crisis, Anthem decreased its reliance on business and individual clients. Anthem bulked up its government business and established a new Pharmacy Benefits Management (PBM) unit, which together made up the 75% of the company’s income.

“This is the biggest positive takeaway from the quarter, as we were somewhat more concerned about the outlook for health insurers which get a large share of their revenue from employer-sponsored plans,” said Charles Rhye, analyst from Cowen Healthcare Investments.

“We think Anthem’s results should reassure investors and provide positive readthrough for Cigna which reports tomorrow.”