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This Major Health Insurer Is Sticking With Obamacare

Health Insurance Provider Anthem Blue Cross To Hike RatesHealth Insurance Provider Anthem Blue Cross To Hike Rates
The Anthem offices in Woodland Hills, Calif. Photograph by David McNew—Getty Images

Health insurer Anthem (ANTM) on Wednesday said the Obamacare individual insurance exchanges are not as profitable as it originally expected, but it is not planning to exit like competitor UnitedHealth Group (UNH).

Anthem CEO Joseph Swedish said the company had picked up more exchange customers than it expected during the first quarter and that it was planning to grow in that market.

“I think a sustainable market can be built,” Swedish told investors on a conference call. “We have positioned our portfolio to grow enrollment in the right markets with the right products in 2017.”

The exchanges were created as part of President Barack Obama’s Affordable Care Act, often called Obamacare, but are about half the size initially forecast and customer costs have been high.

Last week, UnitedHealth Group said that it was losing too much money on its exchange customers and would largely exit the marketplace in 2017. Other insurers, such as start-up cooperative healthcare plans created by the reform law, have also lost money.

Anthem executives said it was too early to estimate the costs of its new Obamacare members, but that it expected to continue to break even or have small profits. It added 184,000 net new members during the first quarter for a total of 975,000 members.

Anthem is talking to the government about possible changes to the marketplace such as updating how customer risk is shared among insurers, changing the exceptions allowed for enrollment outside of the usual time, the grace period for non-payment of insurance premiums and creating new insurance products.

Anthem sells these plans in the 14 states where it operates Blue Cross Blue Shield plans.

Anthem’s stance of sticking by the exchanges contrasts with UnitedHealth’s decision to cut its risk, one analyst said.

“They are definitely more aggressive on the exchanges. That has been their strategy from the outset and they are more willing to take on the risk of the exchanges,” Vishnu Lekraj, analyst at Morningstar Research said.

 

Profit Beats Expectations

Anthem, which is in the process of buying smaller rival Cigna (CI), reported a better-than-expected profit as it added more members to its Medicaid plans.

Membership in Medicaid plans rose 7.6 percent to 6 million, it said. Spending on medical claims as a percentage of premiums deteriorated to 81.8 percent from 80.2 percent.

First-quarter net income fell to $703 million, or $2.63 per share, from $865.2 million, or $3.09 per share, a year earlier.

Excluding items it earned $3.46 per share, above average analysts’ estimate of $3.32 per share.