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Is Anthem (ANTM) About to Exit Public Exchange Business?
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Anthem Inc. is planning to scale back its participation on loss making public exchange business for 2018, as per analysts who met management. Anthem has 824,000 exchange enrollees and offers plans throughout 14 states, where it is a Blue Cross Blue Shield insurer for the many Affordable Care Act (ACA) marketplaces. It is among the largest insurers offering plans on ACA exchanges.
The news helped the stock to gain 1.27% and was well received by investors, who believed that the curtailment of this loss-making business would shield the company from its losses and help its margins.
With this, Anthem will soon be joining the suite of other players like UnitedHealth Group Inc. (UNH - Free Report) , Aetna Inc. , who after having stubbed their toes with unprofitable public exchanges, have already rolled back their participation on it. Another major player, Humana Inc. (HUM - Free Report) , is planning to stop offering individual ACA plans entirely for 2018.
This doesn’t come as a surprise to us since Anthem gave enough hints of folding its public exchange business during its fourth-quarter earnings conference call. Management had confirmed, “While the direction in Washington has been positive, we still need certainty about short-term fixes in order to determine the extent of our participation in the individual market in 2018. We will be watching developments closely in the first half of 2017 as we evaluate our longer-term strategy for the health insurance exchanges.”
Anthem incurred loss of about $374 million on its public exchange business led by huge claims from customers enrolled on public exchanges. The number of healthy and young individuals who enrolled on these exchanges was far less than aged customers and those with pre-exisiting diseases lacking coverage earlier. This mix of customer population led to a rise in claims as sicker patients went on to utilize medical care under insurance coverage.
Anthem will continue its participation on exchanges if necessary changes are made that could improve its profitability and viability. It calls for a substantial premium increase for 2018.
Withdrawal of Anthem’s public exchanges would mean the loss of another big participant on the exchange markets. This would further thin down consumer choice in Colorado, Kentucky, Missouri and Ohio, which would have no insurers offering cover, according to an analysis from Axios, a news website.
The struggles of the top players have to a great extent made it clear that the exchanges put in place by the former president Obama to provide subsidized health insurance coverage have not fared well with insurers.
UnitedHealth was the first player to sense trouble on the exchanges and therefore was the first to call it quits. Other players like Aetna and Anthem were more tolerant and optimistic, having decided to wait and see before giving up. The retreat by Anthem will give further impetus to Donald Trump to take another run at altering Obamacare after his replace and repeal proposal met with a failure recently. Trump has been an ardent opponent of Obamacare and has called the law a nightmare.
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Is Anthem (ANTM) About to Exit Public Exchange Business?
Anthem Inc. is planning to scale back its participation on loss making public exchange business for 2018, as per analysts who met management. Anthem has 824,000 exchange enrollees and offers plans throughout 14 states, where it is a Blue Cross Blue Shield insurer for the many Affordable Care Act (ACA) marketplaces. It is among the largest insurers offering plans on ACA exchanges.
The news helped the stock to gain 1.27% and was well received by investors, who believed that the curtailment of this loss-making business would shield the company from its losses and help its margins.
With this, Anthem will soon be joining the suite of other players like UnitedHealth Group Inc. (UNH - Free Report) , Aetna Inc. , who after having stubbed their toes with unprofitable public exchanges, have already rolled back their participation on it. Another major player, Humana Inc. (HUM - Free Report) , is planning to stop offering individual ACA plans entirely for 2018.
This doesn’t come as a surprise to us since Anthem gave enough hints of folding its public exchange business during its fourth-quarter earnings conference call. Management had confirmed, “While the direction in Washington has been positive, we still need certainty about short-term fixes in order to determine the extent of our participation in the individual market in 2018. We will be watching developments closely in the first half of 2017 as we evaluate our longer-term strategy for the health insurance exchanges.”
Anthem incurred loss of about $374 million on its public exchange business led by huge claims from customers enrolled on public exchanges. The number of healthy and young individuals who enrolled on these exchanges was far less than aged customers and those with pre-exisiting diseases lacking coverage earlier. This mix of customer population led to a rise in claims as sicker patients went on to utilize medical care under insurance coverage.
Anthem will continue its participation on exchanges if necessary changes are made that could improve its profitability and viability. It calls for a substantial premium increase for 2018.
Withdrawal of Anthem’s public exchanges would mean the loss of another big participant on the exchange markets. This would further thin down consumer choice in Colorado, Kentucky, Missouri and Ohio, which would have no insurers offering cover, according to an analysis from Axios, a news website.
The struggles of the top players have to a great extent made it clear that the exchanges put in place by the former president Obama to provide subsidized health insurance coverage have not fared well with insurers.
UnitedHealth was the first player to sense trouble on the exchanges and therefore was the first to call it quits. Other players like Aetna and Anthem were more tolerant and optimistic, having decided to wait and see before giving up. The retreat by Anthem will give further impetus to Donald Trump to take another run at altering Obamacare after his replace and repeal proposal met with a failure recently. Trump has been an ardent opponent of Obamacare and has called the law a nightmare.
Anthem carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>