(Releads, adds analyst comment, share fall)
By Caroline Humer
April 27 (Reuters) - Health insurer Anthem Inc on Wednesday said it is not planning to exit the Obamacare individual insurance exchanges next year like competitor UnitedHealth Group, and is planning instead on growth in that market.
Anthem Chief Executive Officer Joseph Swedish said the company had picked up more exchange customers than it expected this year and that its planned acquisition of Cigna Corp. would help it expand into more markets in the future.
Even so, Anthem said the exchanges may not be as profitable as it had expected until after next year and only if structural changes are made. The exchanges were created as part of President Barack Obama’s Affordable Care Act, often called Obamacare, but are about half the size initially forecast and customer costs have been high.
“We have positioned our portfolio to grow enrollment in the right markets with the right products in 2017,” Swedish told investors on a conference call. “I think a sustainable market can be built.”
Last week, UnitedHealth Group Inc said that it was losing too much money on its exchange customers and would largely exit the marketplace in 2017. Other insurers, such as start-up cooperative healthcare plans created by the reform law, have also lost money.
Anthem shares fell about 2 percent to $143.13 in New York trading.
Anthem said it added 184,000 net new Obamacare members during the first quarter for a total of 975,000 members. Executives said it was too early to estimate the costs of its new Obamacare members, but that it expected to continue to break even or have small profits. It is aiming for 3 percent to 5 percent profit margins.
“They are saying they are not seeing any issues, and so far so good on the exchanges...but they have to be cautious,” Leerink analyst Ana Gupte said.
Anthem said it is talking to the government about making changes to how customer risk is shared among insurers, the exceptions allowed for enrollment outside of the usual time, the grace period for non-payment of insurance premiums and new insurance products.
Anthem’s stance of sticking by the exchanges is not surprising, one analyst said.
“They are definitely more aggressive on the exchanges. That has been their strategy from the outset and they are more willing to take on the risk of the exchanges,” Vishnu Lekraj, analyst at Morningstar Research said.
Anthem reported a better-than-expected profit as it added more members to its Medicaid plans. First-quarter net income fell to $703 million, or $2.63 per share, from $865.2 million, or $3.09 per share, a year earlier. Excluding items it earned $3.46 per share, above average analysts’ estimate of $3.32 per share. (Additional reporting by Amrutha Penumudi in Bengaluru; Editing by Shounak Dasgupta and W Simon)