Trying to look at the overall impact of the Affordable Care Act, or Obamacare, is something which may depend solely upon your income or your politics. The reality is that the view of this as a success or a failure is just that divisive. Now there is word that yet another major insurer is warning that they may exit or trim their offerings under the Affordable Care Act.
Anthem Inc. (NYSE: ANTM) has warned, along with its earnings report, that it may jettison offering plans under the Affordable Care Act by 2018 if the financial results under this program don’t improve.
Anthem’s third quarter earnings did not meet analyst expectations by and large. Medical costs rose in its Medicaid business, and of course there is the ACA plan angle as well. Now the company sees its adjusted full year earnings at about $10.80 in earnings per share (EPS), a tad lower than prior forecasts.
Here is what really matters in the grand scheme: UnitedHealth Group Inc. (NYSE: UNH), Humana Inc. (NYSE: HUM), and Aetna Inc. (NYSE: AET) have already announced that they will taper or drop their ACA plans. In short, this would mean that nearly all of the major for-profit health insurers will have pulled back or exited selling their health care plans on the government exchanges.
Anthem is the operator of the Blue Cross Blue Shield plans, and the company currently sells the ACA health plans in 14 states under the brand.
Anthem CEO Joseph Swedish warned that insurers need better pricing under the law. He also said that they need to find ways to improve the regulations which govern the sale and administration of such plans. Swedish said:
If we do not see clear evidence of an improving environment and a path towards sustainability in the marketplace, we will likely modify our strategy in 2018. Clearly, 2017 is a critical year as we continue to assess the long-term viability of our exchange footprint. The financial performance in individual ACA compliant products has been disappointing as membership has been short of our original expectations.
Maybe leaving the exchange is just what shareholders now want. Anthem shares were last seen trading up 4.4% at $122.58 after its earnings report. The stock’s 52-week range is $114.88 to $148.00 and Anthem has a consensus analyst price target of $158.94. Anthem also has a 2.1% dividend yield.
24/7 Wall St. wanted to see how the rest of the ACA plan giants were reacting to this news as well.
UnitedHealth Group’s shares were last seen trading up just 0.3% at $139.80, versus a 52-week range of $107.51 to $146.36. UnitedHealth has a consensus analyst price target of $164.81 and it has a 1.8% dividend yield.
Shares of Aetna were last seen trading up 0.2% at $106.04. Its 52-week range is $92.42 to $123.57 and Aetna has a consensus analyst price target of $133.86. Its dividend yield is 0.9%.
Humana shares were last seen trading up 0.5% at $169.51 in mid-day Wednesday trading. Humana’s 52-week range is $150.00 to $191.65 and it has a consensus analyst price target of $200.83. Humana has a dividend yield of 0.7%.
Anthem showed that its benefit expense ratio (medical expense ratio) was 85.5% in the third quarter. That is up 190 basis points from 83.6% in the prior year’s quarter. Anthem said the gain was driven by the Medicaid business due to medical cost experience (notably in Iowa) exceeding the net impact of annual premium rate adjustments and higher membership. The benefit expense ratio was also said to reflect the impact of higher medical cost experience in the Individual business.
The problem with none of the major insurers being in ACA ahead means that the companies which do plan to offer exchange plans might not be competitive or they might not be able to financially handle the risk.
It was widely reported in the last week or so that the Affordable Care plans would see an average hike of 22% for younger populations with the silver level plan. What will it show for the Affordable Care Act if there are no major insurers offering plans on the exchanges after next year?