Health insurers rallied Friday to ease investor and customer concerns about the Affordable Care Act’s public insurance exchanges a day after the nation’s biggest insurer questioned its future in that still-developing market.
Blue Cross-Blue Shield insurer Anthem and Medicaid coverage provider Molina Healthcare both said they are making money off their exchange business, and Anthem joined Aetna, the nation’s third-largest health insurer, in reaffirming its 2015 earnings forecast.
“I think the (ACA) marketplace is going to be around for a while,” said Molina CEO Dr. Mario Molina.
Shares of Molina and other insurers plunged Thursday after UnitedHealth Group cut its 2015 forecast, reported deep losses from its exchange business and said it will decide next year whether it wants to continue in that market. That followed reports earlier this fall that several smaller, non-profit insurance co-operatives would stop selling coverage on the state-based exchanges, which are a key element in the ACA’s push to expand insurance coverage.
Insurers in many markets have struggled to find the right mix of healthy customers to balance the sicker ones since the exchanges opened for business in the fall of 2013. Even businesses that reaffirmed their commitment have had some growing pains. Aetna said last month that it lost money last year on the business, and it’s in the red this year as well.
But the insurer expects improvement, in part because it is learning more about the customers it serves through this business. That will help it set the right prices for future coverage.
Anthem, the nation’s second largest insurer, said its enrolment in the public exchanges fell by 69,000 people to 824,000 in the third quarter. Spokeswoman Jill Becher said the business has been less profitable than expected.
CEO Joseph Swedish said in a statement that the insurer remains committed to the business and “continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market.”
The not-for-profit insurer Kaiser Permanente also said late Thursday that it remained “strongly committed” to participating in the exchanges. Kaiser covers about 450,000 people in nine exchanges, and a spokeswoman said they are confident that the business is financially stable.
Molina said his company has been helped in the exchange business by expanding slowly and focusing on a customer base it already knows how to serve, low-income patients.
“We’re not trying to be all things to all people,” he said.
Even though some insurers have made money so far on the exchanges, industry analyst David Windley sees room for improvement. Insurers are still struggling to attract enough healthy patients, and the analyst said it’s too easy for customers to manipulate the system by doing things like signing up for coverage, using health care, and then stopping premium payments.
UnitedHealth said Thursday it has been hurt in particular by customers who signed up for coverage outside the annual open enrolment window and use more health care in general than those who bought coverage during open enrolment.
“The exchanges currently are an unprofitable, untenable book of business,” Windley said. “That’s an industry issue.”
Aetna said Friday it still expects 2015 operating earnings of $7.45 to $7.55 per share. Anthem, which recent reaffirmed its forecast, said again on Friday that it expects adjusted earnings ranging between $10.10 and $10.20 per share.
Analysts forecast, on average, 2015 earnings of $7.55 per share for Aetna and $10.20 per share for Anthem.
The health insurance stocks rallied Friday. Aetna climbed $4.54, or 4.5 per cent, to close at $104.43. Anthem Inc. rose $3.43, or 2.7 per cent, to $13.29 and Molina Healthcare Inc. jumped $3.49, or 6.3 per cent, to finish at $59.09. Even UnitedHealth Group Inc. rose $2.34, or 2.1 per cent, to finish at $112.97.