Profit soared by 234 percent to $1.2 billion in Anthem's fourth quarter, compared to $368 million for the same period last year, according to the insurer's earnings report Wednesday.
Full year 2017 financial results were also strong. Anthem reported a 55 percent increase in net profits year-over-year of $3.84 billion, compared to $2.47 billion in 2016.
During the fourth quarter, Anthem recorded a one-time, non-cash deferred tax benefit from corporate tax reform of $1.1 billion, reducing the total income tax expense in 2017 to $121 million, an effective tax rate of 3.1 percent.
"We are pleased with our 2017 performance, which is the result of improved execution in all areas of our business and an increased focus on aligning strategic investments and capabilities to more effectively meet the changing needs of the more than 40 million consumers we are privileged to serve," said CEO Gail Boudreaux, who took the reins of the company this year from former CEO Joseph Swedish.
Anthem plans to expand its Medicare Advantage market, which Boudreaux said has historically lagged. The company is already seeing strong individual Medicare Advantage growth going into 2018 that has outpaced the rate as a market.
"I believe we are now well-positioned to leverage our improved individual Medicare Advantage platform," she said. "We continue to expect organic growth rates in the low to mid double-digits over the next few years outpacing growth in our existing markets of 6 to 9 percent."
Medicare Advantage market share will benefit from the completion of Anthem's acquisition of HealthSun in Florida and the pending acquisition of America's 1st Choice in South Carolina. Both will add approximately 170,000 new Medicare Advantage members.
Anthem's government business represents over 50 percent of consolidated operating revenue.
The insurer said it is looking to partner with states on Medicaid, seeing $80 billion worth of incremental business opportunities between now and the end of 2022.
Anthem is also focused on developing strategic partnerships with other health plans and providers including plans in the Blues networks, building on the relationship Anthem has formed with Blue Cross Blue Shield of Minnesota, which goes into effect in the fall of 2018, to serve Medicaid and dual-eligible enrollees.
In 2017, Anthem also partnered with Blue Cross Blue Shield of Louisiana to form Healthy Blue to serve Medicaid members.
"Looking ahead, we see opportunities to continue to leverage our deep expertise in Medicaid to form new partnerships and alliances with our Blue colleague providers and other health plans to expand our presence and reach into new markets," Boudreaux said.
Pete Haytaian, president of the Government Business Division said, "We are very focused on managing the chronically ill. We talked about that being a very important part of our business going forward, managing the chronically ill effectively as well as managing dual-eligibles.
Medicare growth will come from the approximately 11,000 baby-boomers aging to Medicare eligibility each day, Anthem said.
Supporting the growth are improved star ratings, with over 70 percent of membership residing in 4-star plans in 2018. Additionally, Anthem will be only carrying with five 5-star plans following the close of America's 1st Choice acquisition, Boudreaux said.
Anthem announced a new pharmacy benefit manager IngenioRx, in October. CVS Health signed a five-year agreement with Anthem to provide services to support IngenioRX, with CVS Caremark managing certain services such as claims processing and prescription fulfillment.
"We continue to expect our new PBM to deliver at least $4 billion of gross pharmaceutical savings on a run-rate basis once we migrate our enrollment to the new platform by January 1, 2021," Boudreaux said.
Anthem, which left many Affordable Care Act markets, will continue to incur some cost in in its individual ACA-compliant market, but is positioned to re-enter certain markets in 2019 if appropriate, the company said.
Anthem's medical enrollment totaled approximately 40.2 million members as of December 31, 2017, an increase of 325,000, or 0.8 percent, from 39.9 million at December 31, 2016.
During the fourth quarter, medical enrollment decreased by 13,000 due to enrollment declines in the individual business, partially offset by growth in the Medicare, Medicaid, and local group self-funded businesses.
Increases were partially offset by the impact of the one year waiver of the health insurance tax in 2017.
Revenue grew by $1 billion during the fourth quarter, to $22.4 billion, reflecting premium rate increases to cover overall cost trends, Anthem said.