Anthem says COVID-19 costs could rise in coming quarters from variants

By Manojna Maddipatla

(Reuters) -U.S. health insurer Anthem on Wednesday warned of potentially higher COVID-19 costs in the second half of the year in the light of new coronavirus variants coupled with a slowing vaccination rate in the country.

The company's comments come after lower-than-expected medical costs helped it beat Wall Street estimates for second-quarter profit and raise its adjusted earnings forecast for the year by 40 cents.

Health insurers have been conservative in their 2021 outlooks as they expect fluctuations in medical costs due to the impact of virus variants and new outbreaks in some parts of the country, especially in areas with low vaccination rates.

"There's still a considerable amount of uncertainty surrounding COVID in the back half of the year and so we obviously want to maintain a prudent, if not cautious, posture," Anthem Chief Financial Officer John Gallina said.

The company backed its expectations of $600 million in COVID-19 costs in 2021.

Last week, larger rival UnitedHealth said it still expects a $1.80 per share hit to this year's profit due to COVID-19 treatment and testing costs, even as it raised full-year earnings target.

Health insurers seem to be adding in some additional earnings cushion for the second half by not raising by the full amount of the second-quarter beat, given the potential for medical costs to continue to rise, Stephens analyst Scott Fidel said.

Anthem on Wednesday became the latest large U.S. health insurer after UnitedHealth to say it was still watching out for additional guidance on Biogen Inc's newly approved $56,000 Alzheimer's drug Aduhelm.

The U.S. government's Medicare program and private health insurers, which sell Medicare Advantage plans for those over 65 years of age, will be bearing most of the drug's cost and delayed decision on its coverage could slow its uptake by patients.

(Reporting by Manojna Maddipatla in Bengaluru; Editing by Sriraj Kalluvila)