Executives at Anthem Inc. (NYSE:ANTM) are starting to talk openly about their frustration with the performance of the Patient Protection and Affordable Care Act (PPACA) public exchange system.

The company has stuck with America’s Health Insurance Plans (AHIP) and avoided the kinds of announcements about an inclination to pull back from the exchange system that some major competitors have made. 

See also: UnitedHealth says it should have stayed out of the PPACA exchange system longer

The company is reporting a total of $181 million in net income for the quarter on $20 billion in revenue, compared to $507 million in net income on $19 billion in revenue for the fourth quarter of 2014.

The company earned $1.14 cents per share, or 4 cents per share less than securities analysts had expected, according to Bloomberg.

The company ended the quarter providing or administering major medical coverage for 39 million people, up 2.9 percent from the number it was covering a year earlier.

Joe Swedish, Anthem’s chairman, said today at a conference call the company held to discuss earnings that problems in the individual business hurt the commercial insurance unit’s performance.

“Operating results on the public exchanges have lagged expectations during the year as membership was more than 30 percent behind our original expectations,” Swedish said.

Wayne DeVeydt, the chief financial officer, said Anthem is seeing a shortfall in revenue growth because of lack of growth at the public exchange operations.

For a look at more of what Swedish and other executives said today, read on. 

Bleak road

1. Anthem might not be as enthusiastic about offering individual coverage in 2017.

Anthem’s exchange ended the year with about 791,000 exchange plan enrollees.

As postponements of implementation of PPACA provisions expire, Anthem executives expect to see differences between fully PPACA-compliant coverage and other types of individual major medical coverage go away.

Total individual enrollment was 1.7 million at the end of 2015, down 6.6 percent from individual enrollment at the end of 2014.

Anthem expects to see total enrollment in all types of individual coverage continue to fall over the coming year, DeVeydt said.

The Robert Wood Johnson Foundation today put out a commentary in which Kathy Hempstead, an analyst, suggested that the failure of many of the new member-owned, nonprofit Consumer Operated and Oriented Plan (CO-OP) carriers and a possible withdrawal by UnitedHealth Group Inc. (NYSE:UNH) might not have that big of an effect on public exchange product menus.

But Anthem executives sound lukewarm about their own participation in the exchange system. They said individual coverage still appears to be seriously underpriced in some markets.

Swedish noted that the U.S. Department of Health and Human Services (HHS) has made announcements in recent weeks about efforts to deal with insurer concerns about the exchange system, such as a tightening in special enrollment period (SEP) eligibility rules and reviews.

“We’re very observant regarding these moves,” Swedish said. “We’re very hopeful that some of the issues will be ameliorated in terms of the risk and we’ll have a much more sustainable marketplace to engage in.”

See also: Top PPACA official makes tweaks as insurer complaints grow 

Dollar bill

2. Operating costs might pinch producer compensation.

Anthem executives did not directly mention agents or brokers during the conference call, but, in their earnings release, they said they cut selling expense $350 million for the fourth quarter, which was 1.8 percent less than they spent during the fourth quarter of 2014.

See also: California exchange chief proposes agent comp floor

Frosted window

3. “Hot” new alternative distribution channels might not look so hot.

In the past, insurers have suggested that they could do well by selling coverage through private exchange systems, and to and through government programs, such as Medicare and Medicaid.

Private exchange use by employers “didn’t materialize to the level or at the speed anybody anticipated,” Swedish said. “Our position at the moment is that we’re kind of taking a more muted response to private exchange formation and execution…. It’s been such a slow uptake.”

The company said Medicare and Medicaid margins were up, but enrollment in Medicare drug plans was down. Enrollment in stand-alone Medicare Part D plans fell 21 percent, to 371,000.

An analyst asked about “headwinds” in the Medicaid market, and DeVeydt said the company’s Medicaid plan margins have been higher than the company believes to be sustainable.

See also:

Express Scripts plunges as biggest client threatens to leave

Anthem, Aetna lead health insurer rally on 2016 forecasts

   

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