Q1 2021 Anthem Inc Earnings Call
And where participants are encouraged to present a single question. If you wish to ask a question, please press star then one on your telephone keypad. You will hear a prompt that you have been queued you may withdraw your question any time by pressing star then to these instructions will be repeated prior to the question and answer portion of this call. As a reminder today's conference is being recorded. I would now like to turn the conference over the company's management, please go ahead.
Good morning, and welcome to anthems first quarter 2021 earnings call. This is Steve tanal vice president of investor relations. And with us this morning on the earnings call our Gail Boudreaux president and CEO John Gallina our CFO Peter Heights High and president of our commercial and Specialty business Division and Felicia Norwood president of our government business division Gail will be getting the call by giving an overview of our faith results provide an update on our response to the pandemic and touch on our updated Financial guidance before turning the call over to John who will discuss our financials in Greater detail. We will then be available during the call. We will reference certain non-gaap measures reconciliations of these non-gaap measures to the most directly comparable gaap measures are available on our website Anthem Inc., We will also be making some forward-looking statements on this call listeners are cautioned that these statements are subject to certain risks and uncertainties many of which are difficult to predict than generally beyond the control of Anthem these wage.
Glen uncertainties can cause actual results to differ materially from our current expectations. We advised listeners to carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC. I will now turn the call over to Gail.
Good morning, and thank you for joining us today for anthems first quarter 2021 earnings call this morning. We reported first-quarter earnings per share of $6.71 and adjusted earnings per share of $7.01 reflecting growing momentum in our business despite the challenges of the environment when we came together for this call a year. We're only just beginning to understand the scope of the COVID-19 pandemic and its implications for Health Care over these last twelve months. I'm incredibly proud of how we've lived during a period characterized by uncertainty from day one. We partnered with local state and federal officials to ensure. Our members were prepared with the resources and support they need to navigate through the pandemic in 2020 our Associates log more than a hundred and ten thousand volunteer hours and more than 17,000 hours so far off.
2021 addressing critical issues in their local communities such as food and security and social isolation our efforts have recently shifted from a focus on Monday and testing to vaccinations. We recognize that we play a critical role in a fight against the pandemic and ensuring safe and Equitable access to vaccines and Arkham to our multi-channel approach. We've been able to reach nearly two-thirds of our members with information regarding where when and how they can access COVID-19 scenes in their own communities including coordinating in-home vaccinations for are homebound members while covering vaccine Administration costs for a commercial members with no out-of-pocket cost sharing in addition clinicians that are CareMore and health some clinics have helped thousands of our most vulnerable seniors get vaccinated.
I'm incredibly grateful to our Associates who have adapted.
Seamlessly and we're diligently through the pandemic to support our consumers our focus on health starts with our own Associates and we're committed to empowering them to live a healthy lifestyle for those who receives the vaccine. We're offering a choice of one time credit towards their own health care premiums or a donation on their behalf to the anthem cares fund wage, which provides financial support to Anthem Associates in need.
As a company that has been grounded in our local communities for more than seventy-five years. We have an unwavering commitment to positively influence not only the health of our consumers butt off of the communities in which we live and work.
Membership growth in the first quarter clearly reflects the balance and resilience of our core business with strong growth and our government business led by Medicaid Eligibility rebirth applications on hold across the country or organic growth remains. Robust Medicare Advantage membership also tracked in line with our expectations growing 15% off. We're honored to have been selected to serve Medicaid beneficiaries in Ohio a state where Anthem currently holds the leading commercial and Medicare Advantage Market chef positions.
With the launch of this contract Anthem will serve consumers across all products in the state of Ohio further underscoring our ability to be a lifetime trusted Health partner.
Commercial enrollment grew sequentially to start the year are performing expectations with growth led by our risk-based business as expected commercial membership decreased slightly year-over-year driven by in group attrition in our group fee based business in spite of many national account Prospect selecting to delay decisions until 2022 off. We had one of our strongest selling seasons in the past five years. She always exceeded lapses in our large group fully insured business for the sixth consecutive quarter and 410 of the past alone.
Our success speaks to the strength of our sales team the value of our innovative solutions and our commitment to being a valued partner to our customers given are solid rock performance in the first quarter. We are increasing our 2021 adjusted earnings per share guidance to greater than $25.10 from greater than $24.50 off putting this on track to achieve our long-term twelve to fifteen percent annual adjusted EPS growth Target, even as we continue to dedicate resources to combating the pandemic
Looking ahead digital Solutions will continue to drive growth and we are fundamentally changing how we leverage technology to deliver the exceptional experiences that consumers expect from us and to help address Health disparities and improve outcomes by sharing Insight with care providers. We now have close to ten million people engaged on our digital channels with access to a wide array of virtual care Specialties and resources to help them lead healthy lives. One of our digital Solutions anthems concierge CARE program a month distinct problems for our customers are Suite of programs, universally offer a seamless experience remembers facing chronic or complex conditions connecting them with their entire life on a single centralized platform and allowing them to seek support in real time when it's right for them.
today our concierge care programs are
Able to just under 1 million members with line of sight into tripling enrollment over the next few years this program integrates remote patient-monitoring that shares real-time data with care provider at all times. We have also partnered with connected device manufacturers to leverage their capabilities to expand remote care options that allow patients and their clinicians to conduct Virtual Office, dating and personalized experiences for our members better outcomes and improved affordability.
Or deep roots in our communities and our partnership with local care providers enable us to scale these initiatives in real time with a focus on collaborating across the Continuum home while ensuring our care provider Partners have access to best-in-class digital tools and capabilities to help them deliver better outcomes predictive and regain access to data coupled with a growing focus on value-based arrangements with care providers is enabling us to improve access to high quality affordable healthcare and facility better consumer and physician decision-making. The integration of these capabilities is what will enable us to deliver on our commitment to drive commercial medical cost Trend down towards by 2025 a goal. We shared with you at our investor day last month.
Earlier this year. We launched the nation's largest high performance Network in partnership with the Blue Cross and Blue Shield Association. The blue high performance network is guiding members towards prevention who are aligned with our goal of driving greater affordability and improved outcomes. The benefits are compelling with average savings of 11% and up to 20% in our markets and machine-learning. We're also providing members with access to personalized health information to help them make informed Healthcare decisions when searching for providing most digital tools automatically default to recommending providers based solely on location Anthem smart provider finder on our Sydney Health app give consumers greater control of their life by taking into account the factors that matter most such as conditions specific needs affordability and quality.
We're intensely focused on enhancing. Our capabilities aimed at addressing the needs of people with chronic and complex conditions are pending acquisition of my Nexus combines the power of digital in advanced analytics to expertly manage and coordinate home-based Healthcare. Anthem has been a customer of my Nexus since 2017 with more than 830,000 of our individual and group retiree Medicare Advantage members currently managed by my Nexus. We have seen first-hand the positive contributions. My Nexus is off on our members quality of life, and we look forward to expanding this impact across even more of our members.
equally important
This acquisition provides Anthem with another Pathway to managing a greater portion of the overall health care dollar a key strategic pillar of our Diversified business group that will allow them end-to-end seamless experiences from Post Acute Care to Home Health with Pathways to services like aim Aspire and Beacon as well continue to focus on addressing the social drivers of Health. Anthem is introducing new programs and Partnerships to positively impact Community Health beginning this year became an Innovative program designed to address the basic needs of an employer's Workforce through on-site resource coordinators focus on things like housing food transportation and other core resources through this program, Beacon will help employers identify and remove obstacles to creating a safer and more productive work environment for their employees.
The need for this type of solution will only increase as employers transition their Workforce back into the workplace. And we look forward to scaling this offering across our markets in the future wage are going live with a major national retailer in the second quarter as we look ahead to the balance of the year. We stand ready to adapt and carry forward. Our momentum anthems business is among most balanced and resilient in the sector and we have ample opportunity to unlock our full potential by scaling best-in-class Healthcare Services businesses to serve anthems members as well as other health care plans externally should the pandemic come to an end sooner and the economy recover faster our commercial busy. We'll be well positioned to accelerate its growth
Should the pandemic persist our Medicaid business will likely continue to grow at an accelerated Pace regardless of the outcome. We are confident in our ability to deliver of our commitments to our consumers Care Partners and shareholders. I'll now turn the floor over to John to discuss our financial performance in more detail John. Thank you Gael and good morning to everyone on the line is Gail mentioned earlier. We reported strong first-quarter results including gaap burning per share $6.71 and adjusted earnings per share of seven dollars and one cent growth of over 8% year-over-year.
Our first quarter results reflect the execution of our Enterprise strategy while continuing to navigate through the pandemic.
We ended the quarter with medical membership, totaling 43.5 million members an increase of one point four million lives or 3.3% Europe. Despite a challenging macroeconomic environment.
Risk-based membership grew by one point eight million members over the prior-year quarter driven primarily by organic growth in Medicaid aided by the suspension of job applications.
In addition our Medicare Advantage membership grew by one hundred ninety-seven thousand lives or 15% year-over-year in line with our expectations and on track to achieve low double-digit growth for the full year. This growth was partially offset by negative in group change within our commercial fee-based business, which was expected given the economic challenges presented by the pandemic.
For my membership reporting perspective. Please note that we have changed our presentation to delineate commercial risk-based and fee-based membership and include it at am looking back to the first quarter of 2020 in our press release for modeling purposes.
Brr overall growth the membership despite challenging economic backdrop reflects the resilience and value of our core benefits businesses is our significant presence in both commercial and Medicaid continue to compliment one another. Well first quarter operating revenue of 32.1 billion dollars increase 9% over the prior-year quarter or approximately 11% when excluding the impact of the permanent repeal of the health insurer fee growth was driven a higher premium revenue and Medicaid and Medicare and growth in our Pharmacy product Revenue.
The medical loss ratio for the first quarter was 85.6% an increase of 140 basis points over the first quarter of 2020 driven by cost associated with COVID-19, including testing and vaccine Administration cost and to a lesser extent the permanent repeal of the Hill wage adjusted for the health. Our first quarter Mor would have decreased by ten basis points.
Relative to our expectations the cost of COVID-19 related care developed favorably driven by an earlier in sharper decline in Colby hospitalizations than we had anticipated. This was partially offset by a faster recovery and non COVID-19 cost in part due to the accelerated role be seen as well as the impact of an extra calendar day in the first quarter of 2020 medical claims payable for 20 20 dates of service off or prior-year Reserve development also develop better than our expectations, but we're entirely offset by Reserve re-establishment.
our first
Sg&a expense ratio came in at 12.2% a decrease of sixty basis points relative to the first quarter of 2020.
excluding the effects of the health
or sg&a ratio would have increased by sixty basis points driven by increased spending to support growth including our ongoing efforts to become a digital-first Enterprise partially offset by The Leverage against the growth in our operating Revenue.
The Investments we're making today will be key to achieving greater operating efficiency over the long term. It will enable us to achieve are 11:00 to 12 or sg&a ratio Target by 2025 turning to our balance sheet. We ended the quarter with a debt-to-capital ratio of 41.6% off up from 38.7% a year end 2020.
The increase was due to debt raised in the quarter to fund a pending Acquisitions and refinance and upcoming maturity.
We continue to expect a debt ratio to be slightly below forty percent by the end of the year during the quarter. We repurchased 1.4 million shares of our faith in stock at a weighted average price of $316.06 for approximately $447 million dollars representing slightly more than 25% of our full-year guidance.
At this point we continue to believe that our initial guidance of one point, six billion dollars and share repurchase remains appropriate for the full year. We maintain a prudent posture with respect to reserves in light of the pandemic and its Associated uncertainties. And as a result days and claims payable increased by 3.5 days. Quench Ali ending the first quarter at forty six point nine days, which is up five days year-over-year medical claims payable increased nearly 25% year-over-year compared with premium growth of approximately 9% finally or operating cash flow during the first quarter was two point five billion dollars or one point five times net income better than expected and yet another indication of our strong quality of earnings.
Note that operating cash flow is percentage of net income will drop later in the year is we make payments on the multi-district litigation settlement in satisfy certain a caller payments over all we are pleased with our first quarter performance. And as a result, we have raised our full-year outlook for adjusting earnings per share by $0.60 from greater than $24.50 to greater than $25.10.
Raising our guidance reflects both the upside from strong core performance in the first quarter and the approximate $0.30 benefit associated with the extension of the same holiday through the end of the year partially offset by higher vaccine Administration cost in the ongoing uncertainty around the pandemic.
For full-year Outlook continues to embed net cost associated with the code that in the order of six hundred million dollars.
Despite this headwind. We are pleased to be on track to deliver growth in adjusted earnings-per-share inside our long-term annual target range of 12 to 15.
Lower core businesses perform. Well during the quarter. We remain cognizant of the risks and uncertainties associated with the pandemic notably the potential for a long fourth wave.
new COVID-19 variants
Pent-up demand for health care services in the potential for higher Acuity episodes of care associated with the deferral procedures throughout and then or updated guidance contemplates all these factors and we are pleased to pass through much of the upside in the first quarter despite a cautious about what prudent approach the forecasting the balance of this year with much of our guidance Rays reflecting the first quarter outperformance. We now expect between fifty to sixty 54% of our full-year adjusted earnings per share guidance to occur in the first half of the Year given a faster route of the vaccine. We expect non COVID-19 you do the rebound sooner and we now expect to absorb higher COVID-19 vaccination Administration cost during the second quarter.
As a result. We're currently modeling our second-quarter Mor to be near the midpoint of our full-year Outlook of 88% plus or minus fifty basis points, and with that operator, please open up the call to questions.
Ladies and gentlemen, if you wish to ask a question, please press star then one on your telephone keypad. You will hear a prompt that you have been queued you may withdraw your question at any time by pressing star them to
If you are using a speaker phone, please pick up the handset before pressing the numbers. Once again, we ask that each participant limit themselves to a single question wrong to allow ample time to respond to each participant that may wish to participate in this portion of the question and answer session of the call. Our first question will go to the line of Justin Lake from Wolf Pack Mister wolf, please go ahead. Thanks. So a couple of quick numbers questions here first pyd and reserves in the quarter wage growth pyd of a billion and a half significantly above typical but reserves actually grew despite that so it took me to give us some color on you know, how that impacted the quarter Thursday and you know, the by the administration's been making a significant change that changes to the exchanges and Medicaid that would seem to drive membership growth. I was hoping you might be able to give us some color on how you think the benefit might be dead.
You're in the offset against the future.
Restart of redeterminations and Medicaid by the states at some point. Thanks.
Yeah, thank you for the questions Justin and good morning. This is John. So I'll start out with the with the reserve question and then the prior. Development, you know, the one point five billion dollar number looks looks like a big number but you know, please note that the presentations on a gross basis and that number in a vacuum can be somewhat misleading, you know, a large percentage will never hit the income statement. I'm sure you know that as a reserves a release, you know, some of the of the items impact a more rebates and collars risk Corridor calculate wage funding mechanisms with some of our contractual Provisions, but most importantly we believe that we have re-established the Reserves due to the uncertainty associated with COVID-19 and not consistent with maybe a question. You know, I will affirm that we believe that there is no net benefit to the first quarter associated with the pyd that was going
Through the to the the statements is quarter with that. I I just in this is Gail. Thanks for that question in terms of the exchanges. We are pleased about the extended open enrollment and feel that well. We're in the midst of it. Now we feel that there will be some solid membership growth in the individual exchanges in addition though to your second part of the month. How does that affect re-verification? I think at this stage very hard for us to see our assumption is that re-verification remains on hold through all of 2021, you know, we do have a bag folio. We shared that a number of times in the mix serves as a natural Hedge for us. But as we look at, you know the growth inside of our Medicaid business, we've not really seen a significant amount of individuals coming from the commercial Market into Medicaid at the stage some of that just may still be the timing and people are still on their employer plans Etc. But at this stage we haven't seen a Thursday.
Nothing and growth in Medicaid has been predominately through verifications. The other thing I just want to note is that we don't really see a cliff event in 2022 as we work with. Our state's even as re-verification go away in 2022. We see that as much more of a gradual approach as our state's think about continuing to keep people on the Medicaid rolls. So thanks very much for the question and we'll go to the next question.
Next we'll go to the line of Matt Ford from BMO Capital markets. Mr. Bush, please go ahead.
Yes, can you hear me?
Yes, I can. Okay. Sorry. I just wanted to ask a question on your utilization Management program specifically what I'm referring to her boss seems to be some apparent apparently sort of content push back from the hospital providers regarding what they're describing is your push Drive outpatient services off the hospital campus wage that's expensive free-standing locations. I'm not really familiar with what you're doing here. But I know I think I understand you're not alone other plans are doing taking similar activity. I'm just curious about how you're handling the blowback from the hospitals. It's both financial and what they claim is related to quality-of-care.
Thanks for the question, Matt.
I think that there's a lot in there and not just specifically to you know, your question on hospitals, you know, first and foremost. Our focus is on really implementing value-based care and ensuring that are care providers office and the driver's seat of Right Place appropriate place of service, etcetera as I think about your specific question. However, we are looking to work in with our service providers as well as our outpatient facilities to ensure that patients are in the right place to care with what's happened in the pandemic clearly. Our patients were more concerned about being in the hospital settings that allowed us to enable that we supported outpatient care and outpatient settings more specifically and so so we have implemented those policies we have them in place before so this isn't new but I think it's accelerated with the pandemic as patients have become much more comfortable in those settings as well as the access has been greater for for individual.
So in terms of the overall model our Focus again is on affordability trying to drive affordability make sure that it's appropriate Care at the right place and right setting that's been specific and it ties very much to our value base model where we work locally closely with our local physician. So it's not just Anthem doing this through um programs. It's really part of an embedded in our value-based value based programs with Physicians. So, thank you very much for the question. Next question. Next. We'll go to the line of age a rice from Credit Suisse Mister rice, please go ahead.
Thanks. Hi everybody. How much is desk sounds like working with the other Blues you this launch of the high-performance Network you're talking about and the saving generating. I guess I'm interested in how much of a change you have to get in the way people are the patterns that people are using for care of Doctors Hospitals Close to You providers to realize those savings. Are you changing significant amounts of their their typical patterns of utilization to get that off is that sort of around the edges and the extent that you're doing this with the other Blues? I guess I brought it out and also asked you about any updates that you thought about Blues collaboration. Summer is around there.
Thanks for the question AJ. It's a great question. As I shared in my opening remarks. We launched the high-performance Network in conjunction with other blues and just to give a little bit of background on on how it works. It really launched just beginning in January of 2021. So it's a fairly new offering across the system and it's available right now in fifty-five. So most of those about half those roughly half are in Anthem service areas right now, but we comprise about 56% of the US population and it's something we're going to continue to grow every year. So I think that's important. The month savings are significant. I gave you a range of savings anywhere from around 11% up to 20% our goal in this I guess strategy Network strategy is focused on leveraging already deep provider relationships and to scale and simplify it and also focus on the high-performing providers that we know based on our deep data across the country. So what we're seeing
You know in our first offering.
You know, we had a number of customers select us over 350,000. I think total members had access to it. And our first entry again is about ten to fifteen percent of those who have access to order picking the high-performance Network. We expect that to grow again. This is a new offering in January, but it's flexible enough to allow our local markets in partnership with other Blues to continue to build and develop that so again, this is based off of our deep knowledge and deep information that we have around networks and our partnership with other Blues. So thank you very much for the question. Next question. Please next we'll go to the line of Lance Wilkes from Bernstein Mister Wilkes, please go ahead. Yeah. Good morning. Could you just give an update on capital capital priorities? What I was specifically interested in is if you could talk a little bit about your your focus and what you're doing with respect to kind of value-based care delivery initiatives, including steaks and birth.
Fries and things like that and maybe contrasting that with your discussion on digital first and especially businesses across cell in complementary care delivery capabilities in particular Focus off where you're requiring or partnering with companies as opposed to your organic build.
Thank you Lance. I appreciate the question. So, you know, first of all, I think our our approach to the the capital deployment is remaining consistent. We're we're looking to take off 50% of our free cash flow and utilize it for reinvestment in the business as well as m&a and their deployment activities close to 30% for share buyback and 20% off is dividends directly returned back to the shareholders and we obviously want to be very opportunistic and advantageous associated with that. But you know with that I think gay I wanted to make a couple of comments on your specific question. Yeah. Thanks Lance who was a lot in there. So I'll try to try to capture each of them. I want to start with your sort of underlying question which is investments in the care delivery system, you know, as you know, our strategy first and foremost is to partner with primary care physicians in our local markets and I've shared that on a number of times in this called part of that again is one in eight patients already carry wage.
We feel that that model really enables us to work closely with them and that we can drive differentiated Managed Care performance by using the data and we've been investing and and virtual care to make sure that we can make help them make better decisions with that said though. I think it's under I think valued and under understood not understood well in terms of our investments that we are participating value created through our value-based relationships. So where we can keep our members healthier and I think specific examples of where we participate in that value creation and invest is, you know are examples of CareMore and health club recently announced acquisition of mmm and another area that we're we've deployed Capital which I shared various that enable and create new payment models and Jose are the ones that can address the more complex conditions and again examples, there would be my Nexus Aspire and Beacon where we're leveraging that first and foremost across our Anthem membership to create value age.
as well as Anthem and driving down overall cost of care, but also to sell externally so it's a bit of a double strategy there and I think
Help support, you know how we're using our Capital to drive better returns both for our customers as well as Anthem internally and then you know, we shared it invest your day and number of Investments that we're making in life to create the healthcare platform. Some of those are around consumer tools Sydney we've continued to advance where we are with Sydney Care. We're also investing in our health OS model all wrapped around artificial intelligence to really Drive much better decision-making and the last area that I just want to share is we recently announced a collaboration as part of our broader Innovation collaboration that allows us to partner with stakeholders across the health system called hydrogen our goal there is to really support am driving down costs and Trend towards CPI, which we've shared giving consumers access to basic Healthcare needs and this is again another a virtual care opportunity job.
Whether it's via videophone text or chat looking for efficiency and quality the Partnerships with K health and enables us to provide access to Virtual care. So that's an example of innovation month where we're investing as part of the overall health care ecosystem. So again a lot of examples they're trying to give you a sense of both from how we're investing in the health care delivery system and participating in the value. We create there as well as in our virtual tools. So thanks very much for that question. Hopefully, we got to all the components of it next question, please.
Next we'll go to the line of David windley from Jefferies. Mr. Windley, please go ahead. All right. Thanks. Good morning. Thanks for taking my question. I wanted to drill into kind of claims and your ability into pent-up demand and utilization. It seems that patient hesitancy has perhaps been a little bit higher in the senior populations. I think that's logical but it also seems to be born and so I'm I'm wondering if you could speak to the the relative levels of deferred care between the books of business and how much visibility do you feel like you have into you know, what is scheduled how much might come back how much might not come back and whether the reserves that you guys are keeping on the balance sheet at this point are a conservative position against the unknown or more of a a known position against what time?
Kind of able to assess in the system capacity. Thanks.
I thank you David for that one lengthy question. I'll see if I can respond to all of the items that you've you've focused on, you know, in terms of you know, the claims versus a visibility we obviously track that very very closely. Yeah, we're evaluating priests pre-authorization information on a daily basis certainly understand what we're looking at the types of care that are deferred versus those that are not deferred and trying to assess that associated with you know, the core underlying businesses, you know, it's still a litte bit too early to have a noticeable shift in October utilization, but they said we continue to closely monitor. Our markets is vaccination rates increase and you know, in terms of geographic, there's probably not a big disparity at this point associated with lines of business, you know, the you know the the seniors
Population has been vaccinated sooner.
And so we are seeing a a significant decline in COVID-19 inpatient associated with seniors, which means that the non COVID-19 can rebound a bit faster. We bought that we've totally factored that in, you know, people were still able to largely get care in 2020 after the stay-at-home mandates worries. So, you know the way the giant backlog we don't think is quite they're the same way and and there are natural systems capacity as well. Maybe just focus on your reserves that question at the end. We believe our reserves crudely stated and that they are associated with a lot of the unknowns and uncertainties associated with with COVID-19 as opposed to the the other part of your question, ma'am. So thank you for that and hopefully that addresses all of your questions next question, please.
Next we'll go to the line of Steve valiquette from Barclays. Mr. Valiquette, please go ahead.
Good morning, everybody. So yeah, John on the last quarterly conference call you made some positive comments that with the fifty to seventy cents Edmund built into the initial twenty one guy about 20 ft. And you still viewed $25.10 as the proper jump off point in twenty one when thinking about EPS growth and 22 that can still track within the long-term. I guess just giving the updated guidance for 21 stay with the increase has it would be parts that you alluded to just want to confirm what you believe is the update the jump-off point this year when thinking about potentials North to 15% EPS growth 422. Thanks for the question Steve, you know as we discussed last quarter, you know, $25.10 was a level of earnings. Best represented or normalized earnings power for 2021 and we remain confident in our ability to deliver on the twelve to fifteen percent growth Target off of that.
Level beginning in 2022, you know, it's really too premature to get any more specific associated with 20 22 at this point in time. But we do feel very good about the the 25,000 and representing our our core earnings or or normalized earnings power is a as a jump off point. So thank you for the question next question, please.
Next we'll go to the line of Scott Fidel from Stephens. Mr. Fidel, please go ahead.
Hi, thanks and good morning. Just had a question just on the Medicaid business and interested. If you could just give us an update on on what the impact was from birth date from the risk corridors an experience rated rebates in the first quarter and how that trended relative to your expectations. And then just how you're thinking about the tempo of government. Margin over. The course of the Year. First quarter was a bit below the long-term Target, but obviously had the impact from the Medicaid rebates. I'm assuming so just thinking about how that you think that's going to try to over the course of the year off.
Sure. No. Thank you for the question, you know Medicaid.
Medicaid is performing. Well, you know, we do believe that we have received appropriate and actuarially sound rates from our state partners and we very much expect and twenty Twenty-One within our Target. Margin ranges feel very very good about Medicaid Medicare. Maybe just to be very forthright about the Medicare business finished. The first quarter should be below our Target margin ranges, but largely for all the reasons that we've already identified, you know, the elevated COVID-19 cost mostly in January impact at the senior population the reduction in Revenue did a suppressed twenty-twenty utilization which we've talked about on the last call. I certainly impacting and and as you know, we have the continued payment of the 20% drg bump and the same percent Medicare fee schedule increases impacting that line of business.
You know those could be in fact those COVID-19 factors were all transient and you know, we have great membership growth trajectory and Medicare really improving that block of business and wage that the future earnings potential for Medicare is significant feel very very good about the long-term aspects associated with Medicare.
Get a solution may be to come in a little bit just about the Medicaid business.
To thank you, you know our Medicaid business is continuing to perform. Well, we are very respectful that are states are going through a very challenging time in light of the pandemic but we've been working very closely with them to make sure that the race that we're receiving are actuarially sound and taking a view of respect to the long-term. If you know we are at a point now where we roughly 50% of our states have already renewed and are states that renewing the second half of the year with respect to rates were engaged in conversations with them right now, you know, it's you know, this is really an iterative process. We work very closely with our state Partners to make sure that we achieve actuarially sound rate but have been very mindful of the consequences of the pandemic and the recovery that needs to follow cuz we think about 20 22. We are very optimistic about being able to deliver performance within our Target margin range of 2 to 4% and will continue to work closely with our Samsung.
Partners during this time. Thank you. Thanks Felicia. And as you heard, I think we feel very constructive about those businesses. And is John shared with you? A lot of the things that are really transient related to COVID-19. Very good about our our core businesses next question, please
Next we'll go to the line of Ralph Giacobbe from City. Mr. Jacoby, please go ahead.
Thanks. Good morning. You mentioned the delay decisions until 2022. Just wanted to clarify that the 2021 selling season 422 or or were you saying 22 or 23 months? And then just maybe if you can give us a sense of how much of your book is going out this year versus a typical year and just any insights on how much is up for grabs more broadly, and maybe your opportunity to gain sure. I'm within commercial Banks. Sure. Thanks to the question Ralph. Let me just clarify your answer your specific and I'll ask Pizza talk about the commercial market now in my prepared comments. I was really referring to this year's season for national accounts where a lot of individuals deferred from 2021 to 2022. However, we still as I mentioned had one of our most successful selling seasons ever and I really credit app Pete and his team for, you know, the focus of the products and Innovation that they've brought to the market, but it was in terms of pipeline individuals waiting, but people I don't you come a little bit more about the commercial Market, you know, thanks. Thanks again. I think so.
We are we were really.
Please without enrollment landed in the first quarter. We saw nice sequential growth 159,000 in the quarter. Excuse me, the same dynamics that I really mentioned off the past or continuing first of all from an execution perspective a scale noted our our sales continue to exceed our lapses. And what was really nice to see, you know this year in the quarter again is are fully insured growth our local business group. Nice nicely. Sequentially. If you were to sort of say, you know, what was a bit of a headwind or growth could have been more. If not for the economic impacts again associated with Colby and the in group change dynamics that that really continue and most specifically affect our our fee based business. But like I said, I feel very good about our positioning going forward or expectation is strong. Our portfolio products are choice is strong and as we see the economy improved we're very confident that we're going to continue to see growth accelerate.
Yeah, and and rails just a quick comment on your other question about what is the season it's really early in the national account selling season. So we're it's really developing at this stage. We are seeing some suspended opportunities and certainly will update you as we get to the second second quarter call will have a little bit better Insight. But overall we feel really well positioned. I think our our offerings have been resonating quite wage biggest issue for Pete right now is just the in group attrition that came through in the first quarter next question, please
Next we'll go to the line of George Hill from Deutsche Bank Mister Hill, please go ahead.
Hey, good morning, and thanks for taking the question one of the things that you guys highlighted in. The press release was that a change in timing is related to the PBM business any impact of showing integrated Pharmacy and Medical on the positivity of results. I guess. Could you talk a little bit more about what you're seeing in the the selling of the Integrated Medical and Pharmacy business and the impact of the app. Adjustment. Thanks.
I'm going to ask you to to address that thank you. Yeah, thanks for thanks for your question, you know, we mentioned this but you know last year because the code that we did see a bit of hesitancy in terms of transitioning a pharmacy in Tradition and transition of Em's especially on the upper end of the market as you'd expect that said, we are a beginning to see and I'm very very pleased with the progress. We're beginning to see more activity back to your point the teams working very closely on the integrated value proposition. I think down Market. We we are definitely beginning to see good signs are when are wind rate is improving down market and the RFP activity is picking up and at the upper end of the market, there's still a bit of hesitancy. But as I said, we are seeing RFP activity pick up for 20 22, we are in the middle of that selling season right now. We are in a lot of finalists presentations and and and we're we're across several different opportunities. I would say it's just like, yep.
As it relates to the National selling season. It's it's early as it relates to 2022 still and I'd say over the next.
Several weeks and months we'll have better visibility on on our wins on the upper end of the market headed into 2022. Thank you. Next question, please.
Next we'll go to the line of Robert Jones from Goldman Sachs. Mr. Jones, please go ahead.
Thanks for the question. I guess maybe just to stick with ingenio, you know operating games in the quarter. We're relatively strong know. I was hoping maybe you could give a little bit more around the drivers there, and I do think in the office and he did call out and out of. Adjustment. Just wanted to make sure we understood that as we think about modeling ingenio for the balance of the year. Thanks.
Thanks very much for the question, you know overall ingenio has been performing extremely well based on our expectations. And again, it's the growth within ingenio and took the strong work on that we've had in terms of the one-time adjustment that was called out. It really is a true up in our specialty pricing. So on a run-rate basis, we still feel very good and bullish about it being down and half percent margin Target. That's sustainable. So as you think about that overall that's those are really the key drivers. I think ingenio has really hit its stride in terms of our life. One of the things I think that's important to keep in mind that our first quarter 2020 results were somewhat elevator artificially elevated the because we relax the refill too soon for vision part of the pandemic and the pandemic was intensifying here is everyone knows so we that resulted in a pool forward of earnings from the second quarter into the first of twenty. So hopefully that gives you the Insight that that wage
Looking for thanks for the question.
Next we'll go to the line of Joshua Raskin from nephron. Mr. Raskin, please go ahead.
Hi, thanks. Good morning. Are you seeing any evidence of an increase in utilization either pent-up demand for higher Acuity resulting from you know Preferred Care from last year.
No, thank you Josh. I think it's it's still just a bit early to to see any noticeable shift in on Coby to utilization or pen up the man. You know, we are seeing you know, some of our states like Maine and Connecticut have some of the highest vaccination rates where Arkansas and Texas appeared to be a bit lower. There's really not a big material difference in utilization levels between those markets and I think part of it has to do with the comment that I made earlier in the Q&A session that you know folks were able to get access to care in twenty twenty-five stay-at-home rules were relaxed. So at this point in time, yeah, we are taking a very cautious approach certainly monitoring all the variables, but you know, we do believe that our original outlook for utilization is is appropriate and prudent next question, please
Next we'll go to the line of Ricky goldwasser from Morgan Stanley Mister goldwasser, please go ahead.
Yeah, hi. Good morning. So my question is unless I mean clearly in the quarter was high expecting the investment in in Enterprise when we think about these Investments. I mean you talk about everything that you're doing in digital should we think about these are sort of front-loaded versus kind of like rest of the month and then as we think about a specific investments from your perspectives that are what makes you most excited about and how how is the relationship with locks on an indicator health and the digital side of relates to the internal Investments we can just would love to hear a little bit more about that.
Thank you, Ricky. I'll start out by answering the beginning of your question and turned over to Pete to talk a little bit more about chaos and that aspect of your question. But you know as you as you know that wage in you to invest in new digital and mobile capabilities to grab Drive greater Automation and enhance our customer experience really. Well as a consumer-facing tools, you know, we've focused on improving the way we do business with a distribution Partners. We have a new bloke or portal that offers distribution Partners a simplified digital platform to enable them to sell seamlessly off and we're standardizing our clinical and well-being Solutions and preset packages make it easier for employers to understand and purchase Suite of products most relevance of your needs. So I give those examples just tell you that your digital capabilities and digital Investments are impacting every aspect of the company in every aspect of the business, you know, and that's with also doing all our system consolidation work wage.
We've been focused on here for the last several years in terms of the spending, you know, obviously we did accelerate some spending here in the first quarter, but we will be spending on this throughout the years the the sg&a ratio will go down a little bit in the latter half of the year is our Revenue accelerates, you know, specifically when we go live with North Carolina Medicaid income of the continued growth that we expect in Coram Medicaid with the special enrollment for ACA all all businesses of a drive the Top Line accordingly, but there's a you know, there's still a lot of spending left to be done in order to achieve all of our goals and expectations. But with that I'll turn it over to Pete to talk a little more about Cahill. Yeah. Thanks. Thanks a lot John and you know, I'll just jump off of what Gail was saying earlier about the acceleration of digital in our product offerings and the importance of Partnerships and our partnership with Cam Blackstone is is really another example of one of these strong Partnerships. We're we're wage.
Developing an approach to accelerate the use of digital to really help drive more efficient and effective care with a differentiated consumer experience specifically as it relates to this Partnership Act upon all this is helping us offer direct consumer direct employer and direct insurer or product options that that really enabled Anthem has the front door to healthcare. It's really creating this digital first experience where access to basic care needs can occur via as as Gale said earlier text chat and videos with a physician and if more acute care needs are in person care, I needed it really helps facilitate or triage care to the right Care at the right place at the right time. And so yes, this is just another great example of a partnership that helps bring greater efficiency and a better consumer experience to our members.
Ricky you asked a an important question about which Investments and pieces of digital we should use
Should be really excited about and I guess I wanted address that directly cuz I think that this is really our investments are long-term Investments to drive growth in a business model transformation and quite frankly. I think I'm excited about all of them. But fundamentally what we shared at invest your day the digital platform for health, which is going to transform how we work and what we do both at the consumer level as well as at the level of our care providers with our health OS operating platform. Plus we're also investing heavily in in Virtual care. So again that goes back to my earlier comments around us participating in the value creation of that all surrounded by the use of the data that we've had locked for a long time. So ability to be predicted with a I so I'm I'm excited about the business transformation digital drives across all of our businesses. And I think that's really the core to put a sort of final point on how we think about the Investments as John said, you know, our goal is again, this is to drive off.
In our business and we are committed to the this is our way to get to the long-term 11:00 to 12 % administrative expense ratio that again we shared it invest your day. So thanks again for the question. There's a lot of initiatives embedded inside of that but I think fundamentally it's about a business model transformation and a digital platform for help. Thanks to the question. Next question. Please next we'll go to the line of money back from Bank of America Mister fischbeck, please go ahead great. Thanks trying to to understand the moving pieces in the guidance cuz you guys you guys beat and then you're raised by the speed but then it seemed like half of the raise was due to sequestration. He didn't change your view on the COVID-19 headwind. So that doesn't seem to be an offset to the numbers. And then you said the core business was performing better than expected. So just trying to reconcile all of that. I guess maybe you just elaborate a little bit more we see the Core Business came in better-than-expected dead.
Driving the race what exactly you know is coming in better-than-expected and if it's coming in better-than-expected, why isn't that leading to a larger raise, you know through the rest of the year?
Thank you for the question Kevin. And as you pointed out there are many moving Parts associated with with the guidance for the year. Go first quarter results of $7.01 were we're about sixty cents. I have a consensus estimates. And as you point out the sequestration extension adds another $0.30 of upside and then with all that we also have the fourth wave of COVID-19. Is that been more prolonged than anticipated and also just you know a month or so ago we found out that we required to increase the vaccine Administration rates from $8 of those two $48 of those, you know, all in with the you know, with that core performance, you always feel very comfortable delivering the upside back to the shareholders. Amazing guy came up to $25.10 in terms of core performance, you know core performance is a lot of things, you know, it's a growth, you know, we've seen great core performance and better than wage.
in commercial
Medicaid and ingenio and diversified business group. Although I'm very very well and you know, we've seen growth and and all those areas, you know, the medical costs just look at the cost incurred plus the expectation of pent-up demand. We feel good about that and the sg&a efficiencies on a run-rate basis after we pull out some of the investment spending money, you know, so we're really a very bullish about how well-positioned we are and what the future holds so we've raised guidance accordingly. Thank you for the question next question, please.
Thank you or next question will go to the line of Charles Rhee from Mystery, please go ahead.
Yeah, and thanks for taking the question, you know, you know, maybe want to go to go back you're talking earlier about you know, the work you're doing particularly for social drivers of money and a lot of new programs and Partnerships that you were talking about and particularly with Beacon and you kind of made a comment about Beacon like it's kind of is that talking about transitioning it from a lack of service to be delivered through a retail kind of model. Could you talked about going live with a over the major national retailer? Maybe can you talk a little bit more about how that actually works wage what the economics are for Anthem in in the who's paying for the service? Is it still employers any any kind of commentary? That would be helpful. Thanks to the question Charles. Let me clarify a little bit about what the same Innovative model that we're building one of the things that we've learned both of our own employees quick frankly and the work that we've done in the community is that the social drivers obviously have a huge impact on people's Health Club.
Health and that is always been embedded in the core of Anthem strategy. The specific program that Beacon is working on is with a large National employer basically who is a retailer support all of those efforts within their own employee population. That's a I think an Innovative product offering I would think of it that way as a way to connect all of these issues that affect employees we've had at Anthem. We actually built into our own employee benefit program this year with something we call a Health Essentials program to help.