By Caroline Humer
Anthem Inc, which has 1.1 million customers in individual Obamacare plans, said it was moving ahead with its 2018 insurance filings but had told state regulators it could increase premiums sharply and exit some markets.
Shares of the U.S. health insurer, which also reported much higher-than-expected quarterly earnings on Wednesday, rose 4.1 percent.
President Donald Trump and Republican lawmakers have vowed to overhaul the Affordable Care Act, which is often called Obamacare, but have not agreed on how to do that, making it difficult for insurers to plan for next year.
While insurers expect Obamacare to continue through 2018, the Republican disagreements have put two important funding aspects into question: cost-sharing subsidies for patients’ out-of-pocket costs and an industrywide health insurance tax.
Anthem, the largest Obamacare insurer alongside Molina HealthCare Inc, is the first to detail how it will handle this.
Anthem Chief Executive Officer Joseph Swedish said on a conference call with analysts that without cost-sharing subsidies, premium rates could rise 20 percent or more. If the health insurance tax is in place in 2018, rates could increase 3 percent to 5 percent, he said.
As a result, Anthem may reduce local area participation, request additional rate increases, eliminate product offerings or exit “certain individual ACA-compliant markets altogether,” Swedish said.
Anthem operates BlueCross BlueShield plans in 14 states.
The cost-sharing subsidies are “a major part of the ACA, and it would be a major blow to the insurers if the administration withheld funding,” Morningstar analyst Vishnu Lekraj said.
First-quarter Obamacare individual insurance medical claims were a bit higher than expected, but higher 2017 premiums brought in more revenue, Anthem said. As a result, the ratio of claims paid to premiums received was more favorable in the quarter.
Two days after Express Scripts Holding Co said it had lost its important pharmacy benefit manager contract with Anthem, Swedish said his company was still looking at all possible vendors and solutions.
Anthem, which has sued Cigna Corp to stop the smaller rival from terminating their proposed $54 billion merger after U.S. antitrust regulators rejected it, also said on Wednesday that it expected an appeals court ruling soon.
Anthem’s net income rose to $1.01 billion, or $3.73 per share, in the first quarter from $703 million, or $2.63 per share, a year earlier.
Excluding special items, the company earned $4.68 per share, beating the analysts’ average estimate of $3.86, according to Thomson Reuters I/B/E/S.
Operating revenue rose about 10 percent to $22.32 billion, exceeding estimates of $21.27 billion.
(Reporting Caroline Humer in New York and Ankur Banerjee in Bengaluru; Editing by Shounak Dasgupta and Lisa Von Ahn)