Anthem CEO Joseph Swedish talks ACA exchange plans, Express Scripts rift, Cigna merger

Anthem CEO Joseph Swedish said Tuesday that the insurer is still evaluating the extent of its participation in the ACA exchanges next year. Image: Anthem Inc.

It is still too soon to say what Anthem will do about the individual marketplaces next year, CEO Joseph Swedish said Tuesday, noting that a lot depends upon whether the government decides to keep funding a key Affordable Care Act subsidy.

Anthem, which is a major player on the ACA exchanges, plans to file preliminary rates for its individual market plans under the assumption that cost-sharing reduction (CSR) payments will continue to be funded next year, Swedish said during the insurer’s first-quarter earnings call.

RELATED: Special Report—8 ways to fix the Affordable Care Act

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The subsidies are the subject of a court case that challenges the legality of their funding, and neither the Trump administration nor Congress has committed to funding them past when the case is resolved, despite repeated pleas from healthcare industry groups. Still, Centene CEO Michael Neidorff said on his company’s Q1 earnings call Monday that he expects CSRs won’t be eliminated.

However, if CSRs do disappear, premium rates could go up 20% next year, Swedish said. Failing to fully repeal the health insurance tax, he added, could further hike premiums by 3-5%.

He also said that Anthem will notify states in which it sells ACA exchange plans that if it isn’t clear by early June whether CSRs will be funded, the insurer will consider adjusting its rates, changing its product offerings or exiting certain markets entirely.

RELATED: Anthem poised for major ACA exchange pullback, analysts say

So far this year, Anthem’s claims experience for its individual market products is better than the year prior, Swedish said, though a bit worse than the insurer had predicted. He said Anthem will have a better idea of how that business segment is performing in the second quarter.

Overall in Q1, Anthem reported a net income of $1.0 billion, or $3.73 per share, a 43.7% year-over-year increase. Its operating revenue was $22.3 billion, a 9.9% increase compared to Q1 2016. The company’s medical membership increased 1.8% to 40.6 million members by the end of the quarter.

Swedish addresses PBM contract, merger case appeal

Pharmacy benefits manager Express Scripts made headlines Monday by announcing it did not expect Anthem to renew its contract after it expires in 2020. It was just the latest chapter in a dispute between the two companies over an additional $3 billion in prescription drug savings Anthem claims it is owed.

Swedish confirmed Tuesday that Anthem has put out request for proposals for a new PBM provider, but he also emphasized that the insurer hasn’t yet ruled out any options—including Express Scripts.

Anthem expects to have an update on its PBM plans in Q4, Swedish added, noting that “we’ve very excited about the opportunity to put together a new solution that serves our members better.”

He offered little details about Anthem’s pending lawsuit against Express Scripts, other than to note that the litigation was still in the discovery phase.

On the subject of different litigation—Anthem’s appeal of a judge’s ruling against its bid to acquire Cigna—Swedish said the company expects to hear a decision from the appellate court relatively soon. Oral arguments were held in late March.  

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

He also noted that there is a hearing May 8 in a Delaware court regarding Anthem’s motion to stop Cigna from terminating their agreement. Cigna sued Anthem earlier this year in a bid to exit their merger contract and collect damages. 

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