Anthem lost almost 70,000 members from the individual exchanges in the third quarter this year, and many of those people moved from Anthem to another health insurer in the market. The migration is expected to continue in the fourth quarter and parts of 2016.
However, Anthem CEO Joseph Swedish said Wednesday that people were flocking to competitors because of “unsustainable pricing” and expressed confidence Anthem would gain more exchange members in the long term. “We are well-positioned for growth as this market stabilizes,” he said.
The next open enrollment starts Nov. 1, but people can buy coverage at any time if they have a “qualifying life event,” such as getting married or moving to another state. Anthem's individual exchange plans represent just a small slice of the insurance giant's overall business, but the shift indicates that people are willing to ditch the popular Blue Cross and Blue Shield name if it means they can at least get lower monthly premiums. In several instances, though, those competitors are folding since the prices aren't covering the medical claims.
The Affordable Care Act created not-for-profit, consumer-governed co-op plans to provide competition in the individual and small-group marketplaces, though the program's scope and funding were cut significantly before it ever got off the ground. Still, co-ops enrolled more than 1 million people since they started selling plans in 2014 largely because of their cheaper premiums.
Swedish referenced the spate of co-op closures during an earnings call Wednesday. He said that Anthem “will not chase price” to boost exchange enrollment and that insurers will establish more “rational” plan prices in the coming years. Anthem had 824,000 exchange members as of Sept. 30, down from 893,000 at the end of the second quarter. Despite the higher medical-loss ratios in that group, Anthem is still turning a small profit on the plans, executives said.
Anthem Chief Financial Officer Wayne DeVeydt added that the exchange market will “harden” after the two temporary premium risk programs in the ACA expire after 2016. Many co-ops have relied on payments from those programs to balance out the medical risk of their members.
Larger carriers have historically opposed the government's co-op program, which inherently would dig into their market share. America's Health Insurance Plans submitted comments on the co-op program in 2011, arguing that “establishing a different set of standards” for the new insurers would create an “unfair advantage.” The Blue Cross and Blue Shield Association wrote its own comment letter to the CMS asking for tight regulations and oversight of co-ops. Thirteen co-ops remain.
Overall, Anthem's profit in the third quarter jumped 4% to $655 million. The insurer collected more than $19.9 billion of revenue in the quarter, a 7% increase from the same period of 2014. Anthem tallied 38.7 million health plan members, up 174,000 from the second quarter of this year. Medicaid remains one of the biggest areas of growth for Anthem, which just won a new managed Medicaid contract in Iowa and retained its business in Georgia.
Anthem will hold a special shareholder meeting Dec. 3 to vote on the approval of its $54 billion acquisition of Cigna Corp. Cigna shareholders will have their own meeting the same day. Swedish testified at a few congressional hearings last month. The company still has to clear state and federal antitrust reviews.
No update was given on the cause or expenses of Anthem's February cyberattack, which exposed personal information of approximately 80 million people. Anthem maintains that no credit card or medical data were stolen and that potential costs could be “significant,” according to a regulatory filing.