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Anthem boosts bottom line, but exchange enrollment, pricing a concern

Anthem boosts bottom line, but exchange enrollment, pricing a concern

A spike in Medicaid enrollees helped Anthem Inc. achieve single-digit growth in its third-quarter revenue and profit, but company executives said Wednesday that individual lines business will continue to hurt the health insurer's overall profitability.

Anthem also said its merger with rival Cigna Corp. remains on track.

The Indianapolis-based health insurer increased its total revenue by 7.3% through the three-month period ending Sept. 30, to $19.90 billion.

Anthem's net income for the third quarter rose 3.8% to $654.8 million over results reported the same quarter last year.

Revenue growth was driven primarily by a 15.5% increase in Anthem's Medicaid enrollment versus membership totals from a year ago, as well as modest gains in the company's employer-sponsored and Medicare memberships. Anthem's total medical enrollment grew 3.1% compared with a year earlier, held down mainly by an 8.8% drop in the company's individual memberships.

During a conference call Wednesday with analysts, Anthem executives said they expect the company's individual lines business to remain a detractor to its overall profitability, due primarily to slower-than-expected enrollment growth and pricing issues in the public health insurance exchanges established under the federal health care reform law.

“When you look at our circumstances with respect to the individual business, we've witnessed an exchange enrollment shift of about 30% downward migration compared with our initial expectations, which we believe reflects the slower market growth overall, as well as market share losses due to unsustainable pricing by some of our competitors,” Anthem President and CEO Joseph Swedish said during the conference call.

Anthem announced earlier this month that it will withdraw from health care exchanges in three Wisconsin counties in January and significantly reduce the number of exchange-based plans it sells in 34 other counties throughout the state.

“You have fewer enrollees nationally and price points that we just don't think are sustainable, so we've made a conscious decision that we're not going to chase it,” Wayne DeVeydt, Anthem's executive vice president and chief financial officer, said during the call. “We believe the answer is to be patient and see this through, versus racing to the bottom.”

Cigna merger on track

Mr. Swedish also said that Anthem's proposed $54 billion merger with Cigna remains on track to close by the end of 2016. The companies' shareholders are scheduled to vote Dec. 3 on the deal.

“We're in the process of responding to the second HSR (Hart-Scott Rodino Act premerger information) request by the Department of Justice,” Mr. Swedish said. “We also continue to work with our state regulatory representatives to address their questions.”

Several medical professional groups, including the American Medical Association and American Hospital Association, have publicly opposed Anthem's purchase of Cigna that it and other proposed mergers in the health insurance industry will ultimately stifle competition and harm consumers.