(Adds details on quarter, analyst comment, share price)
Oct 23 (Reuters) - Health insurer Anthem Inc reported a better-than-expected quarterly profit and raised its full-year forecast on Wednesday, riding on higher sales of its government-backed health plans.
Medical costs in its Medicaid business, which sells health plans for low-income Americans, improved in the quarter, the company said, even as overall costs rose and came in higher than Wall Street targets.
Anthem's comments on Medicaid echo those of rival Centene Corp on Tuesday. Centene missed estimates for medical costs, but reassured investors that costs for its Medicaid plans remained stable.
"As with Centene yesterday, investors are now seeing Medicaid pressures as a temporary and resolvable issue," BMO Capital Markets analyst Matt Borsch said.
Rising medical costs have been a growing concern for investors in health insurers this year, with both Anthem and Centene missing estimates for benefit expense ratio, a key metric used to measure costs, in the second quarter too.
In the third quarter, Anthem said its benefit expense ratio, the amount it spent on medical claims versus income from premiums, worsened to 87.2% from 84.8% a year earlier.
Analysts on average expected 86.59%, according to IBES data from Refinitiv. A lower benefit expense ratio is better for health insurers.
The health insurer, which earlier this year launched pharmacy benefits business IngenioRx, forecast adjusted 2019 earnings of more than $19.40 per share, up from its prior view of more than $19.30.
Operating revenue from its government business, which sells Medicare and Medicaid health plans, rose 14% to $15.96 billion.
Net income rose to $1.18 billion, or $4.55 per share, in the third quarter ended Sept. 30 from $960 million, or $3.62 per share, a year earlier.
Excluding items, the company earned $4.87 per share, ahead of the average analyst estimate of $4.82.
Total operating revenue rose 15% to $26.44 billion, beating estimates of $25.88 billion.
Shares of the company were up 1.5% at $264.10 in premarket trading. (Reporting by Tamara Mathias and Trisha Roy in Bengaluru; Editing by Anil D'Silva)