Business Context and Reporting Period
This Form 8-K is a current report filed by Anthem, Inc. (now Elevance Health, Inc.) on November 29, 2018. The filing discloses Regulation FD information regarding upcoming investor meetings scheduled between November 29, 2018, and December 7, 2018, where management intends to reaffirm full-year 2018 financial guidance.
Key Financial Metrics and Guidance
- Net Income Guidance: Reaffirmed at greater than $14.46 per share for full year 2018, which includes approximately $1.14 per share of net unfavorable items.
- Adjusted Net Income Guidance: Excluding unfavorable items, the company expects adjusted net income to be greater than $15.60 per share.
- Medical Membership: Revised downward to approximately 39.5 million for year-end 2018.
- Fully Insured Membership: Expected to be approximately 14.2 million.
- Self-Funded Membership: Expected to be approximately 25.3 million.
The filing does not provide specific values for total revenue, operating cash flow, debt levels, or liquidity ratios for the period.
Material Changes Versus Prior Period
The primary material change is the revision of the 2018 year-end medical membership guidance. The reduction to 39.5 million is attributed to the delayed launch of the Blue Cross Blue Shield of Minnesota Medicaid partnership, which is now expected to go live in the first quarter of 2019. All other full-year 2018 guidance metrics issued in the third-quarter earnings release remain unchanged.
Outlook, Risks, and Contingencies
Management intends to reaffirm all prior guidance except for medical membership. The filing includes extensive forward-looking statements subject to significant risks, including:
- Regulatory Environment: Changes in the Affordable Care Act (ACA) and state regulations affecting premium rates and Medicaid/Medicare programs.
- Operational Risks: Healthcare cost trends, provider contracting, and enrollment reductions.
- Legal and Litigation: Ongoing litigation with Cigna Corporation regarding the failed merger agreement, including potential termination fees and damages.
- Financial Risks: Substantial outstanding indebtedness, potential downgrades in financial strength ratings, and impairment of intangible assets.
- Strategic Risks: Non-compliance with the Express Scripts pharmacy benefit management agreement and risks related to information systems and data security.
Investor Verification Checklist
- Verify the impact of the Minnesota Medicaid partnership delay on Q4 2018 revenue recognition.
- Confirm the specific nature and magnitude of the $1.14 per share in net unfavorable items included in the net income guidance.
- Monitor the status and potential financial exposure of the litigation with Cigna Corporation.
- Review the company's ability to meet the revised membership targets given the delayed launch timeline.
- Assess the adequacy of cash flow to support share repurchases and dividends amidst the stated indebtedness risks.