2017-04-26 17:22:02
Anthem Threatens to Leave Health Exchanges if Subsidies Are Halted

Even as Anthem, one of the nation’s largest insurers, reported an improved financial picture for the last year, the company warned on Wednesday that it would consider leaving some federal health care marketplaces or raising its rates sharply if the government does not continue subsidies to help low-income people.

Joseph R. Swedish, the company’s chief executive, set a deadline of early June for a decision on the subsidies, saying Anthem would weigh increasing rates by at least 20 percent next year.

These subsidies, called cost-sharing reductions because they reduce the amount people must pay out of pocket when they go to the doctor, have become a political football as President Trump and House Republicans try to repeal the federal health care law and negotiate a spending bill with a deadline looming this week.

While Republicans successfully sued the Obama administration to discontinue funding the payments, the decision is on appeal, and Mr. Trump has recently indicated that he wants to use the subsidies as a bargaining chip with Democrats.

If the subsidies ended in 2018, the lack of funding “would cause further market instability,” Mr. Swedish said, which would make the company’s participation in the federal market “even more challenging.”

While the Republican-controlled Congress and President Trump insist that the markets under the Affordable Care Act have been “imploding,” Anthem’s earnings report on Wednesday offered another sign that some markets are stabilizing.

By adding new customers and raising prices, Anthem said its overall profits reached $1 billion on higher revenue of about $22 billion, beating Wall Street expectations and sending its stock higher on Wednesday.

Anthem, which operates for-profit Blue Cross plans in 14 states, is the latest insurer to say its performance has improved over the past year in the individual markets created under the Affordable Care Act. The company said it now covered 1.1 million people through the state marketplaces or exchanges, with an additional 500,000 customers buying individual policies under the law.

The company is deciding where to sell policies and what to charge for 2018, and it is telling state insurance regulators that it will need to make significant adjustments to its offerings if the government funding remains unclear by early June.

While Mr. Swedish praised some of the steps that have been taken to stabilize the markets, he also urged the Trump administration and Congress to eliminate the tax on health insurance as a way of keeping premiums lower and to create a reinsurance program or high-risk pool to help insurance companies pay claims for people with very high medical expenses.

Another for-profit insurer that has a major presence in the market, Centene, announced its results on Tuesday. The company expressed confidence that there was support from both Republicans and Democrats for the subsidies and said it expected to remain in the market.

Like many other insurers, Anthem has struggled to make money in the marketplaces, but it said it expected to break even or do better this year.

Two independent analyses, from the Kaiser Family Foundation and Standard & Poor’s, suggest that the markets over all are stabilizing despite the claims from Mr. Trump and congressional Republicans that they are collapsing. But there have been recent exits by high-profile insurers like Aetna and Humana, and there is concern that some places could be without an insurer to sell individual policies under the law. Other markets may have only a single insurer offering coverage.

Anthem’s results appear to bolster the view that the remaining insurers appear to be turning the corner, although significant uncertainty remains, said Gary Claxton, an analyst with Kaiser who was one of the authors of the recent report.

Anthem also addressed questions about its pharmacy benefit manager, the company that handles the drug claims for its customers. This week, that company, Express Scripts, said it would most likely lose Anthem, its largest customer, beginning in 2020, a significant blow. Anthem accounted for more than $17 billion of Express Scripts’ annual revenue. In the first quarter of this year, Anthem accounted for 18 percent of Express Scripts’ business.

The news followed a bitter legal battle between the two companies, in which Anthem sued Express Scripts last year for $15 billion and claimed the company had been overcharging it for drugs.

In comments this week on CNBC, Express Scripts’ chief executive, Timothy C. Wentworth, said he would like to keep Anthem’s business, adding, “We’ve given them terrific service.”

In its call with investors, Anthem seemed to suggest that it had not decided which company it would pick to handle its drug business. “We’ve not made a final decision with respect to any vendor,” Mr. Swedish said. “We’ve not ruled anyone in or out.”

The company said it would evaluate its options and make a decision by the end of the year. Mr. Swedish said he hoped that the two companies would reach an amicable resolution on its lawsuit.

Mr. Swedish also discussed Anthem’s proposed $48 billion merger with Cigna, another large health insurer. In February, a federal judge blocked the merger after the Justice Department challenged the combination as being harmful to consumers, one of two insurance mega-mergers that it successfully challenged. Anthem and Cigna have had a fraught relationship, but Anthem is appealing the decision and said it expected a ruling anytime now on whether the merger can proceed. Analysts have largely discounted the possibility that the merger will go ahead, but the appeals court has not issued its decision.

“We remain committed to completing the acquisition as soon as possible,” Mr. Swedish said.