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Second-Biggest Health Insurer Bullish on Obamacare Exchanges

By Erin Mershon, CQ Roll Call

April 27, 2016 -- The second-largest U.S. insurer, Anthem Inc., picked up more health exchange customers than it expected during the 2016 open enrollment period—a gain it attributes in part to the failure of more than a dozen nonprofit co-ops created under the health law.

Anthem's uptick is likely to continue, executives said on a call Wednesday. The company's optimism stands in stark contrast to UnitedHealth Group, which forecast hundreds of millions of dollars in losses on the insurance marketplaces and announced withdrawals from at least 26 of the 34 states it participates in.

Enrollment is a closely watched barometer of the health coverage expansion spawned by the 2010 health care law.

"Over time we do believe we're well-positioned for continued growth in the exchange marketplace, if the market stabilizes to a more sustainable level—I think that is a key consideration," said CEO Joseph Swedish. "Clearly the performance has lagged expectations throughout the industry, as some of our peers have recognized. In consideration of that, we are monitoring the market very closely to see that our offerings continue to be ... rational and sustainable for the customers."

The company picked up about 184,000 customers during the open enrollment period that ended Jan. 31, but officials said they didn't yet have the data to know whether those were new enrollees or existing exchange customers who switched from another health plan. Executives said many of their biggest gains came in states like New York, Kentucky, and Colorado, where the nonprofit co-ops that were created to compete with established insurers failed.

"Generally where we've seen unexpected uptake has been markets where the co-ops have become insolvent," said  Wayne DeVeydt, the company's chief financial officer. "Where we're probably surprised on the uptake though, has been that we weren't the next lowest-cost carrier. In many cases we were substantially higher than the next, or several next lowest-cost carriers. There appears to be a little bit of a flight to safety, if you will, and security."

Swedish said that the company intends to leverage that feeling and "how folks are connecting back to us in terms of a known brand" more effectively across all its markets.

Policy Priorities 

Still, Anthem isn't expecting the new customers will yield huge profits. Executives on the call emphasized that their projections remain "conservative," especially as they try to understand the health needs of the new enrollees.

"Frankly, given how 2015 played out, we want to take a more conservative posture over this year and see how this develops," said DeVeydt. Both he and Swedish said several times that they are keeping estimates at a "break-even" point. Officials throughout the insurance industry have said people who enrolled were sicker than predicted.

To better improve the exchange business for insurers, Swedish outlined regulatory changes he favors, including eliminating the 2010 law's health insurance tax and further narrowing the number and variety of special enrollment periods outside of the official sign-up period. He wants to tweak a mechanism that shifts money from insurers with healthier-than-average consumers to those with a relatively large number of sick patients and limit a grace period that allows those who don't pay their premiums to stay enrolled.

"When you put all that together in a mosaic, I think maybe a sustainable model can be built, and we will continue to perform in the marketplace in a way that lets us maybe try to achieve the membership we had originally anticipated when this effort began in 2014," Swedish said.

Swedish also said he expects Anthem's pending merger with Cigna Corp. will "present a meaningful improvement in affordability for our members." He said he expects that merger to be completed in the second half of this year.

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