CEO Joseph Swedish: Anthem might exit ACA marketplaces if margins don't improve

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Anthem, facing the same profitability issues that led other insurers to pull back from the Affordable Care Act exchanges, is considering doing the same if those "disappointing" results continue.

Both membership and profit margins have been lower than expected for its ACA-compliant individual products, Anthem CEO Joseph Swedish said on the company’s Q3 earnings call Wednesday.

Anthem had planned to enroll 3 million members on ACA-compliant individual plans by 2018, assuming marketplace enrollment would reach the 25 million mark as the Congressional Budget Office had originally estimated. Instead, since marketplace enrollment is only expected to reach about half of CBO's original estimate, Anthem’s individual ACA-compliant membership tallied just 1.4 million as of Q3 2016.

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Joseph Swedish
Joseph Swedish

In addition, though costs during the third quarter were “marginally better” than recent expectations for ACA-compliant individual products, “we continue to experience higher-than-initially-expected costs for members with chronic conditions,” Swedish said.

Thus, operating margins in this book of business have been lower than expected since 2015, rendering overall financial performance on individual ACA-compliant products to be “disappointing,” he added.

Anthem believes it has taken the appropriate actions to return to “slight profitability” in 2017 for its marketplace plans, Swedish said, noting that a better pricing and regulatory environment also would improve the exchanges’ sustainability. But the insurer also isn’t going to discount the possibility of pulling back from the marketplaces, as Aetna, UnitedHealth and Humana all have done.

“Clearly, 2017 is a critical year as we continue to assess the long-term viability of our exchange footprint,” Swedish said. “We will continue to closely monitor this business, and if we do not see clear evidence of an improving environment, and a path toward sustainability in the marketplace, we will likely modify our strategy in 2018,” he added.

Insurer exits have sparked concerns about exchange competition, as analyses show more areas will have just one insurer to pick from on the exchanges than in years past. 

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