Anthem Seeks Clarity from Health Law Debate
July 26 2017 - 12:16PM
Dow Jones News
By Anna Wilde Mathews
Anthem Inc. said that if it doesn't quickly get more certainty
about the future of the Affordable Care Act exchanges, it will
likely further pull back its planned participation for next year, a
threat that adds to the pressure on Senate Republicans as they
struggle to pass health-care legislation.
The big insurer, speaking during its second-quarter earnings
call, strongly emphasized that it needed answers about the future
of federal payments that help reduce out-of-pocket costs for
low-income ACA exchange-plan enrollees. Chief Executive Joseph R.
Swedish said that without greater clarity, particularly around the
cost-sharing payments, "we will need to revise our rate filings to
further narrow our level of participation." He added that the
insurer may make decisions "in a relatively short period of time"
and in September at the latest.
Overall for the second quarter, Anthem reported a profit of
$855.3 million, or $3.16 a share, compared with $780.6 million, or
$2.91 a share a year ago. Excluding one-time items, the company
earned $3.37 per share, compared with $3.33 a year ago. Analysts
polled by Thomson Reuters had expected $3.23 in earnings per share.
Premium rate increases and growing enrollment also drove up
operating revenue 4.3% from last year to $22.2 billion. Anthem also
boosted its full-year outlook.
On plans for its pharmacy-benefit business -- another closely
watched topic -- Mr. Swedish said that the insurer's bidding
process for a new contract "has further validated our expectation
to be able to lower our pharmacy costs by more than $3 billion
annually." He said Anthem is still looking at a "hybrid" model that
would have it work with an outside vendor while controlling aspects
of the process, but he emphasized that the insurer was still
looking at all options. Anthem is dueling in court with its current
pharmacy-benefit manager, Express Scripts Holdings Inc., which has
said it doesn't expect Anthem to reup their existing deal.
Anthem has already announced it will exit the exchanges next
year in three of the 14 states where it currently sells those plans
-- Ohio, Indiana and Wisconsin -- which it said represents a little
less than 10% of its enrollment in ACA plans, which is around 1.5
million. Anthem has also said it would sharply reduce its exchange
presence in Nevada. Anthem is a particularly important player in
the exchanges because of both its large overall enrollment and the
fact that in the states where it offers the plans, it often has the
largest geographical footprint as well as the biggest market
share.
Anthem said Wednesday that the health level of its ACA members
has been consistent, meaning that claims aren't proving more
expensive than the insurer expected, and it still projects that it
will have "a slight loss" on the business for 2017. Overall, the
insurer has around 1.8 million people enrolled in individual plans,
with about 300,000 of them in grandfathered coverage that predates
the ACA. Of its 1.5 million enrollees in ACA plans, about 1 million
got their insurance through a health-law exchange.
More broadly, Mr. Swedish laid out priorities for health-care
legislation that included "appropriate funding for all whom we
serve;" a "balanced risk pool," meaning a mix of healthy and
less-healthy enrollees in marketplaces; rules that "limit expensive
abuses prevalent in today's marketplace;" and the elimination of
the ACA's health-insurance tax. Mr. Swedish said the company is
watching the health-care debate "by the hour" and expects the
outcome to affect its Medicaid and exchange businesses.
Mr. Swedish said the company, which aims for 3% to 5% margins on
its ACA plans, believes that steadying of the marketplaces is "a
distinct possibility," but "so much depends on how the legislative
process plays out and what stabilization rules are put into place."
He said, "We just don't know yet" what will happen on the
cost-sharing payments. Anthem will "only participate in rating
regions where we have an appropriate level of confidence that these
markets are on a path towards marketplace stability," he said.
Mr. Swedish reiterated that if the cost-sharing payments are
killed, Anthem will need to seek rate increases of around 18% to
20% on exchange plans. The insurer said those increases would come
on top of significant hikes it is already seeking, which it said
were 20% or more. Anthem's filings have included increase requests
of 37.7% in Virginia, 33.8% in Connecticut and 30.2% on
health-maintenance organization plans in Colorado. Anthem also said
that the ACA's health-insurance tax adds about 4% to 5% to its
premiums.
The question is whether markets can handle such large increases,
or whether they would cause so many healthy enrollees to drop their
coverage that the business wouldn't be sustainable, Anthem
executives said. Mr. Swedish said there can be a "cascading
effect."
Cara Lombardo contributed to this article.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
July 26, 2017 12:01 ET (16:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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