Anthem awaiting certainty on cost-sharing reduction payments to determine ACA viability

In second quarter earnings results released this week, Anthem CEO Joe Swedish left room for more exits from the Affordable Care Act marketplace due mostly to the uncertainty of federal cost-sharing reduction payments.

Anthem has until September 27 to leave ACA markets for 2018.

"The work to determine our final 2018 market footprint in the individual ACA-compliant business is not yet complete," Swedish said during the earnings call. "We expect to provide additional clarity on our final 2018 market footprint during our third quarter call, if not sooner."

Anthem's strategy is to continue only to participate in regions where there is an appropriate level of confidence that these markets are on a path toward marketplace stability, Swedish said.

[Also: Anthem leaves two more exchange markets in Indiana and Wisconsin]

Anthem has notified state regulators in three states of its decision to largely exit the ACA market, which represents a little less than 10 percent of the insurer's total Individual ACA-compliant enrollment, he said.

"While we have filed initial rate request in all of the other states, it is important to note that those filings do not necessarily indicate the final level of participation," Swedish said. "There are still many areas of marketplace uncertainties, principally, cost-sharing reduction subsidy funding that make it challenging to be comfortable with the level of predictability of a sustainable marketplace."

If Anthem isn't able to gain certainty soon, it would revise its rate filings to further narrow the level of participation, he said.

Swedish said Anthem is closely monitoring state and federal legislative and regulatory developments.

For the second quarter ending June 30, Anthem reported income of $855.3 million, compared to $780.6 million during the same three months in 2016.

Government business membership is flat and is being concentrated in new and specialized populations and services, such as long-term services and support and those with intellectual and developmental disabilities, Anthem said.

Anthem is analyzing its pharmacy benefit manager strategy for long-term solutions, saying it would be premature to share specifics. This spring, the insurer said it was ending its relationship with PBM Express Scripts, but left the door open.

"We remain very confident in our ability to drive significant value for our clients, members, and shareholders," Swedish said.

[Also: Anthem ends Express Scripts contract, turns down drug price concessions]

Anthem expects it can lower its pharmacy cost by more than $3 billion annually, "once we transition to our future state," he said. "Should we decide to leave Express Scripts, we're very confident in our ability to thoughtfully plan for the transition of our customers to our new solution."

Operating revenues in the second quarter totaled $22.2 billion, an increase of $924 million or 4.3 percent versus the second quarter of 2016.

The increase is primarily due to the premium rate increases across all lines of business, as well as higher enrollment in Medicaid, large group, and Medicare lines of businesses.

Medical enrollment totaled approximately 40.4 million members at June 30, an increase of 0.6 million members, or 1.6 percent, from 39.8 million at June 30, 2016.  In the first six months of 2017, membership grew by 468,000.

[Also: Timeline: 7 years of ACA's near death legislative maneuvers]

But during the quarter, individual enrollment declined by 107,000,  which Anthem said it expected. Total individual enrollment of approximately 1.8 million members consists of 1.5 million ACA-compliant members and 300,000 non-ACA-compliant members.

Anthem is operating under the assumption that the individual ACA-compliant business will operate at a slight loss for the year.
 

Twitter: @SusanJMorse