Anthem CEO and President Joe Swedish this week warned that the company could reconsider its presence on the Affordable Care Act exchanges for 2018 if the financial results of the product are as disappointing as current third quarter earnings show.
For its third quarter, Anthem's profit fell 6 percent to $617.8 million, from $654.8 million in the third quarter of 2015.
While medical enrollment grew in most sectors, it fell in the exchange business. Membership in ACA-compliant products and operating margins have been below original expectations since 2015, Swedish said.
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"We will continue to closely monitor this business, and if we do not see clear evidence of an improving environment and a path toward sustainability in the marketplace, we will likely modify our strategy in 2018," Swedish said during Wednesday's earnings call. "We believe both the pricing and regulatory environment need to be improved to drive toward a sustainable and affordable marketplace over the long term."
Anthem has taken actions to return to slight profitability in 2017, Swedish said.
"Clearly, 2017 is a critical year as we continue to assess the long-term viability of our exchange footprint," he said. "We continue to expand higher than initially expected costs from members with chronic conditions, as we've discussed with you previously."
At the start of 2016, Anthem's membership on the ACA exchange market was 30 percent below expectations, according to its first quarter report. Going into 2016, the company expected a decline of another 300,000 members.
Anthem indicated then that things must change, including pricing, in the volatile market, where it had exchange products in 14 states.
Other medical enrollment is doing well, increasing by approximately 1.3 million members in 2016, or 3.4 percent, totaling approximately 39.9 million members as of September 30. Anthem said it expects medical enrollment to grow by 1.05 to 1.25 million members for the full year.
Third quarter earnings were consistent with expectations, according to John Gallina, executive vice president and chief financial officer.
"Our third quarter results reflected our focus on improving affordability for our members and capitalizing on growth opportunities across our businesses. The strong membership growth across the majority of our lines of businesses this year is further testament to the value proposition we bring to the marketplace," Swedish said.