Anthem sees tough individual health competition

Executives at insurance giant Anthem say 2017 competition in their parts of the individual commercial health market looks fierce.

Some other big insurers, including Hartford, Connecticut-based Aetna and Minnetonka, Minnesota-based UnitedHealth Group, began the open enrollment period for 2017 with products available through only a handful of state Affordable Care Act public exchange programs. Those insurers now have a much smaller presence in the public exchange system, and in the individual major medical market as a whole, than they had a year ago.

But Anthem executives told securities analysts today during conference call that other big players’ individual market cutbacks had little effect on competition in the states in which Anthem sells individual coverage.

“We still have many, many competitors,” John Gallina, Anthem’s chief financial officer, said during the conference call, which was streamed live on the web.

Related: Anthem earnings, dissected

The number of issuers in California has fallen to 11, from 12, but the player that left was small, Gallina said.

Virginia still has eight individual health issuers, inside and outside the public exchange system, and Georgia has five, Gallina said.

The enrollment period for 2017 started Tuesday and is set to run until Jan. 31.

Anthem, an Indianapolis-based, company, holds the Blue Cross license in California, and the Blue Cross and Blue Shield licenses in states such as Georgia, Indiana, New York and Virginia.

Some of the new nonprofit, member-owned Consumer Operated and Oriented Plan carriers spawned by the ACA CO-OP startup loan program used low premiums to capture large shares of the individual market in 2014. When many of those plans failed in 2015 and early 2016, that forced the CO-OP enrollees to shop for new coverage, Gallina said. Many of those consumers chose Blue Cross and Blue Shield plans.

The individual market withdrawals and cutbacks that have occurred since then are unlikely to give the remaining issuers the same kind of enrollment boost, Gallina said.

Individual rates will probably go up more than 20 percent in 2017 throughout the country, and Anthem plans have probably increased their premiums a little more than average, Swedish said. He said prices for the company’s bronze plans, which pay only about 60 percent of the actuarial value of the ACA essential health benefits package, and silver plans, which pay about 70 percent of the actuarial value of the EHB package, are probably somewhat higher than competitors’ bronze and silver plan prices.

Anthem executives said that they expect to have about as many individual health enrollees next year as they have this year, and that they are hoping their individual health unit will produce a small profit in 2017.

This year, losses at the unit will probably amount to a number in the “low to mid single digits” as a percentage of unit revenue, executives said.

Joseph Swedish, Anthem’s president, said the company may reduce its level in the ACA exchange program in 2018 if conditions fail to improve, in part because the exchange system has attracted only about half as many enrollees as the Congressional Budget Office predicted it would.

How Anthem did

Anthem reported $618 million in net income for the third quarter on $21 billion in revenue, compared with $654 million in net income on $20 billion in revenue for the third quarter of 2015.

The company ended the quarter providing or administering major medical coverage for 40 million people, up from 39 million people a year earlier.

Total on-exchange and off-exchange individual enrollment increased 0.7 percent, year over year, to 1.8 million, and enrollment in small group plans increased 0.8 percent, to 15 million.

Enrollment in large group plans increased 4.1 percent, to 13 million. Enrollment in Medicaid plans rose 9.4 percent, to 6.4 million, and enrollment in Medicare plans fell 0.3 percent, to 1.4 million.

Executives noted that higher-than-expected medical costs at an Iowa Medicaid plan hurt earnings this year.

Claims at the individual health unit were about what the company had expected, executives said.

Executives described pressure on fully insured small-group enrollment as a headwind, and they were noticeably reluctant to give details about the small-group operation. They said they will give more information about that business when they release earnings for the fourth quarter of 2016.