Wall Street punishes Anthem after positive earnings report
Anthem posted better-than-expected earnings and raised its profit expectations for the rest of 2019, so Wall Street responded by … selling off the stock, dropping Anthem’s share price by 4.5%.
What's happening: Investors are freaking out because the big health insurance companies — UnitedHealth Group, Centene and now Anthem — have indicated their medical costs are rising faster than projected.
By the numbers: One of the most highly watched metrics for insurers is the medical loss ratio, which shows how much of members' premiums are going toward paying medical claims.
- Anthem’s MLR in the second quarter was 86.7%, meaning almost 87 cents of every premium dollar went to cover someone’s medical expenses. That was higher than the 85.8% that Wall Street analysts had expected.
- 0.9 percentage points may seem like a small difference, but that translates to roughly $200 million in unanticipated claims, given how large Anthem is.
Anthem argued that health care expenses aren’t rising wildly, but instead states are not paying high enough Medicaid rates to their plans.
The bottom line: Wall Street's latest sell-off is yet again obscuring the financial and political power insurers enjoy.