Anthem CEO uncertain about 2018 Obamacare participation

(Reuters) - Anthem Inc said on Wednesday that it might stop selling individual plans on the Obamacare exchanges in 2018 unless the U.S. government tightens enrollment and eligibility rules to better balance sick and healthy customers.

The office building of health insurer Anthem is seen in Los Angeles, California February 5, 2015. REUTERS/Gus Ruelas

Anthem Chief Executive Officer Joseph Swedish, speaking to analysts about the company’s better-than-expected fourth quarter earnings, said he was optimistic that will occur soon enough for the insurer to decide in the next few months how it will proceed.

U.S. President Donald Trump has vowed to repeal and replace Obamacare, former president Barack Obama’s health reform law, saying it is unaffordable. But he has also promised to fix it and not “pull the rug” out from under anyone. Insurers say they also want to keep customers in health plans.

“They have a shared interest in as little disruption as possible for the market,” healthcare research group Avalere Health CEO Dan Mendelson said.

Anthem and other insurers, such as Aetna Inc, say they need changes that would improve the balance of sick and healthy customers to be able to submit 2018 exchange plans in April or May.

“As we approach the end of the first half of this year, we will have to make decision on whether or not we surgically extract ourselves from certain rating regions or even on a larger scale, depending on the stability of the marketplace,” Swedish said.

Swedish said Anthem was talking to lawmakers and the new administration about its proposed changes, and other insurers have been lobbying as well.

Republican lawmakers have spent years devising ways to replace Obamacare but have yet to agree on the specifics of how to proceed.

“The window for them to implement those changes in a prudent and judicious manner is small,” said Morningstar analyst Vishnu Lekraj, referring to Republican lawmakers, “and if they can’t get it done soon, they are going to have to delay, or it might not even happen.”

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Insurers say they will not be ready to sell any new products until 2019 at the earliest, and these Obamacare plans may be the only individual products available in 2018. Fewer insurers in the market mean less competition and possibly higher premiums.

Changes can move forward in various ways. Republican Senator Lamar Alexander of Tennessee, for instance, has said such insurer requests should be part of an immediate “rescue package” for the exchanges. Or the Department of Health and Human Services could make the rule changes, with the White House signing off.

Anthem and other large insurers say the enrollment rules, lax eligibility confirmation and premium payments by third parties skew the pool of patients to the unhealthy.

Anthem, the No. 2 U.S. health insurer, is one of the biggest players in the more than 10-million-customer Obamacare individual market. It is also one of the few large insurers that expect to break even or be profitable there this year.

The company has more than 800,000 people in plans purchased through the online exchanges that offer income-based subsidies.

Aetna, which has 190,000 people in these exchange plans, says it expects to lose money on them.

Shares of Anthem were up 2.7 percent at $158.26.

The company said during the conference call that it was restarting stock buybacks after a period of inactivity, a change that Aetna is making as well and which buoyed its shares on Tuesday.


Anthem is still waiting for a ruling on the U.S. government’s lawsuit to block its deal to buy Cigna Corp. Most Wall Street analysts expect the deal to be rejected on antitrust grounds.

A different U.S. judge blocked health insurer Aetna’s proposed $34 billion acquisition of smaller rival Humana Inc last week.

Anthem said it expected 2017 operating revenue of $86.5 billion to $87.5 billion. Analysts on average were forecasting $86.68 billion, according to Thomson Reuters I/B/E/S.

The company said it expected earnings of more than $11.50 per share this year before special items, compared with analysts’ estimates of $11.53.

Fourth-quarter net income rose to $368.4 million, or $1.37 per share, from $180.9 million, or 68 cents per share, a year earlier.

Additional reporting by Ankur Banerjee in Bengaluru; Editing by Lisa Von Ahn