Health Plan Weekly

Anthem Warns of Greater Commercial Enrollment Drop in Second Half

August 6, 2020

While Anthem, Inc. has seen less of an enrollment dip in its commercial business than it originally feared when the COVID-19 pandemic and economic recession first took hold, the insurer’s executives said during a July 29 earnings conference call that they expect that attrition to accelerate in the coming months as some furloughs become permanent job losses.

From March 31 to June 30, Anthem saw enrollment in its commercial and specialty business lines drop by 290,000. “But as you think about unemployment, that was fairly muted,” especially when it comes to Anthem’s risk-based business, President and CEO Gail Boudreaux said during the earnings call. She and other Anthem executives attributed that effect to the fact that many companies have thus far furloughed rather than laid off workers, thanks in part to federal stimulus funding.

By Leslie Small

While Anthem, Inc. has seen less of an enrollment dip in its commercial business than it originally feared when the COVID-19 pandemic and economic recession first took hold, the insurer’s executives said during a July 29 earnings conference call that they expect that attrition to accelerate in the coming months as some furloughs become permanent job losses.

From March 31 to June 30, Anthem saw enrollment in its commercial and specialty business lines drop by 290,000. “But as you think about unemployment, that was fairly muted,” especially when it comes to Anthem’s risk-based business, President and CEO Gail Boudreaux said during the earnings call. She and other Anthem executives attributed that effect to the fact that many companies have thus far furloughed rather than laid off workers, thanks in part to federal stimulus funding.

“We can’t predict exactly what’s going to happen when they come off [furlough]; it will depend on the strengthening of the economy and what happens there and what employers decide to do,” Boudreaux said.

Ultimately, “we do expect further declines, assuming the economy continues to operate at less than full capacity,” Boudreaux said of Anthem’s commercial business. Meanwhile, Anthem’s Medicaid and Medicare enrollment grew by 599,000 from the first quarter of 2020 to the second quarter. Overall medical enrollment rose by 0.7% between the first and second quarters of this year, and it increased 3.9% in the second quarter of 2020 compared with the prior-year quarter.

Anthem reported adjusted earnings per share of $8.91 per share in the quarter, compared with $4.36 during the prior-year period. The insurer’s quarterly operating revenue was $29.2 billion — an increase of $4 billion, or 15.9% compared with the prior-year quarter — which Anthem attributed to “pharmacy product revenue related to the launch of IngenioRx,” the company’s PBM.

Centene Reports Lower Than Expected Enrollment Growth

August 5, 2020

Centene Corp. reported second-quarter earnings in line with its own projections and Wall Street consensus, but also enrolled fewer members than executives had expected. The firm touted revenue growth from its acquisition of WellCare Health Plans, Inc. and attributed strong revenues to decreased utilization related to COVID-19 shutdowns, though Centene said claims rebounded in June to more normal levels.

Centene’s adjusted earnings per share (EPS) was $2.40, which came close to what SVB Leerink analyst Stephen Tanal described as the Wall Street consensus of $2.42. The firm’s non-adjusted EPS increased by 79.5% compared with the second quarter of 2019, which is mainly attributable to the WellCare acquisition.

By Peter Johnson

Centene Corp. reported second-quarter earnings in line with its own projections and Wall Street consensus, but also enrolled fewer members than executives had expected. The firm touted revenue growth from its acquisition of WellCare Health Plans, Inc. and attributed strong revenues to decreased utilization related to COVID-19 shutdowns, though Centene said claims rebounded in June to more normal levels.

Centene’s adjusted earnings per share (EPS) was $2.40, which came close to what SVB Leerink analyst Stephen Tanal described as the Wall Street consensus of $2.42. The firm’s non-adjusted EPS increased by 79.5% compared with the second quarter of 2019, which is mainly attributable to the WellCare acquisition.

According to a transcript of the firm’s earnings call on July 28 prepared by the Motley Fool, Centene Chief Financial Officer Jeffrey Schwaneke reported a medical loss ratio of 82.1%, compared to 86.7% in the second quarter of 2019 and 88.0% in the first quarter of 2020.

“The HBR was low by historical measures and the decline was primarily driven by a reduction of medical utilization as a result of the COVID-19 pandemic, partially offset by increased costs associated with COVID-19 claims,” said Schwaneke. “In terms of monthly trends, utilization deferrals experienced during April and May largely reversed in the month of June.”

New enrollment so far this year has not met Centene’s internal expectations. As a result, Schwaneke expects peak membership growth to be 1.4 million in the fourth quarter, compared to a previous projection of 1.9 million new enrollees through August.

“We believe the temporary nature of some of the unemployment, enhanced unemployment benefits, and employers furloughing rather than terminating employees has all contributed to lower application rates than what is implied by overall unemployment levels,” Schwaneke explained.

Wall Street perception of the results was mostly positive. But Tanal said that Centene’s second-quarter results “demonstrate that the effects of the pandemic on Medicaid enrollment could be less helpful than initially anticipated, providing a smaller offset to Medicaid rate pressure that is likely to impact the business in the coming quarters.”

Experts Are Skeptical of Trump Administration’s Drug Pricing Executive Orders

August 4, 2020

In executive orders released July 24, the Trump administration renewed its push toward a signature campaign issue: lowering drug prices. The three executive orders call for regulations allowing drugs to be imported from other countries, requiring Federally Qualified Health Centers to make insulin and epinephrine available to low-income members of the public at the discounted prices set by the 340B Drug Pricing Program, and removing safe harbor protections under the Anti-Kickback Statue for prescription drug rebates in Medicare Part D.

By Peter Johnson

In executive orders released July 24, the Trump administration renewed its push toward a signature campaign issue: lowering drug prices. The three executive orders call for regulations allowing drugs to be imported from other countries, requiring Federally Qualified Health Centers to make insulin and epinephrine available to low-income members of the public at the discounted prices set by the 340B Drug Pricing Program, and removing safe harbor protections under the Anti-Kickback Statue for prescription drug rebates in Medicare Part D.

“I think that what you have here is a collection of policies that are intended to make noise, but will have little to no practical effect on drug prices before the election,” Avalere founder Dan Mendelson says.

Marc Samuels, CEO of ADVI, says that the proposals seem half-baked, and will likely draw strong opposition. “These executive orders are consistent with the previous [drug pricing] blueprint adopted by the Administration and debated in part in Congress. But having the authority to make quick changes doesn’t mean doing so is a good idea, especially so close to an election,” he says.

The idea of importing drugs from other developed countries, and relying on their drug safety inspection regimes, has popped up in the past. Mendelson, who ran the health division of the Office of Management and Budget between 1998 and 2000, says that although the Clinton administration considered the idea seriously, it found that it wasn’t feasible.

“We looked at it and rejected the policy because we were concerned that it wouldn’t work, and that in fact it would not only compromise the pharmaceutical supply chain but also likely be rejected by the very countries we would want to import the drugs from,” Mendelson explains.

The rebate order addresses a persistent challenge for the administration. And Citi analyst Ralph Giacobbe is skeptical that the proposal will actually manifest substantial changes in the way PBMs do business.

“While this will resurrect some debate on the PBM business model, we see the likelihood as either low or limited in scope,” Giacobbe wrote in a note. “Additionally, [with] the language of HHS having to confirm that this action does not increase federal spending, Medicare beneficiary premiums or out-of-pocket cost may make it a moot point since premiums will definitively rise, in our opinion.”

A fourth executive order would tie drug prices to their list prices in countries with Most Favored Nation status. That order has not yet been released, but could be in the coming weeks.

States May Tighten Medicaid Rates Amid Pandemic

August 3, 2020

Despite growing, bipartisan calls for more federal Medicaid funding to stem states’ budget shortfalls, such a provision is absent from Senate Republicans’ latest COVID-19 relief bill. And while that omission hints at the next big health care battle in Congress, experts say that another Medicaid funding conflict is bubbling up at the state level — over how much to pay managed care plans.

Already, there are troubling signs for Medicaid managed care organizations. Nevada’s legislature recently passed a fiscal year (FY) 2021 budget — effective starting July 1, 2020 — that cuts Medicaid provider rates by 6%, a move expected to save the state $52.9 million. The news of Nevada’s Medicaid cuts comes on the heels of Michigan’s decision earlier this summer to cut the rates it pays to 13 MCOs by nearly 3.3%, according to Credit Suisse analyst A.J. Rice.

By Leslie Small

Despite growing, bipartisan calls for more federal Medicaid funding to stem states’ budget shortfalls, such a provision is absent from Senate Republicans’ latest COVID-19 relief bill. And while that omission hints at the next big health care battle in Congress, experts say that another Medicaid funding conflict is bubbling up at the state level — over how much to pay managed care plans.

Already, there are troubling signs for Medicaid managed care organizations. Nevada’s legislature recently passed a fiscal year (FY) 2021 budget — effective starting July 1, 2020 — that cuts Medicaid provider rates by 6%, a move expected to save the state $52.9 million. The news of Nevada’s Medicaid cuts comes on the heels of Michigan’s decision earlier this summer to cut the rates it pays to 13 MCOs by nearly 3.3%, according to Credit Suisse analyst A.J. Rice.

“Nevada, I think, is on the cusp of what lots of states are going to do, which is to try and cram down statistically significant percentage rate cuts in their Medicaid program,” says Jeff Myers, senior vice president of reimbursement strategy and market access at Catalyst Health Care Consulting. “I know from working with other companies that there are several states, particularly in the South and Midwest, that have really started their contract negotiations very aggressively with where they want rates to be,” he adds.

State revenue collections rise and fall with economic conditions, and with unemployment projected to remain high due to the pandemic-sparked recession, “states are expected to face budget shortfalls that total $555 billion over three years,” Aviva Aron-Dine, vice president for health policy at the Center for Budget and Policy Priorities, said during a recent webinar.

During Anthem, Inc.’s second-quarter earnings call on July 29, executives faced multiple questions about how the insurer is handling Medicaid rate negotiations with states. “In light of everything that’s going on right now, you can imagine there’s quite a lot of fluidity in the conversations we’re having with our state partners,” Felicia Norwood, executive vice president and president of Anthem’s government business division, said in response to one analyst query.

She also pointed out that “roughly 15 of our states today have risk corridors…in place that effectively already limit managed care profitability within certain defined ranges, and we are in discussions with other states that are also considering these kinds of mechanisms.”

Appeals Court Upholds Trump Administration’s Short-Term Plans

July 30, 2020

A Trump administration rule expanding the availability of short-term, limited duration (STLD) health insurance plans will continue after an appeals court panel ruled 2-1 against a suit brought by the Association for Community Affiliated Plans (ACAP). A July 17 statement by ACAP CEO Margaret Murray suggests the trade group for safety net health plans is likely to continue pursuing the case.

STLD plans don’t have to comply with Affordable Care Act requirements mandating plans cover things like outpatient drugs, behavioral health care and maternity care, and they don’t have to offer the ACA’s protections for people with preexisting conditions. The court, in an opinion written by Judge Thomas Griffith, agreed with ACAP’s argument that STLD plans are of lower quality than ACA-compliant plans, but said the government has “wide latitude” to define what STLD plans are permissible.

By Peter Johnson

A Trump administration rule expanding the availability of short-term, limited duration (STLD) health insurance plans will continue after an appeals court panel ruled 2-1 against a suit brought by the Association for Community Affiliated Plans (ACAP). A July 17 statement by ACAP CEO Margaret Murray suggests the trade group for safety net health plans is likely to continue pursuing the case.

STLD plans don’t have to comply with Affordable Care Act requirements mandating plans cover things like outpatient drugs, behavioral health care and maternity care, and they don’t have to offer the ACA’s protections for people with preexisting conditions. The court, in an opinion written by Judge Thomas Griffith, agreed with ACAP’s argument that STLD plans are of lower quality than ACA-compliant plans, but said the government has “wide latitude” to define what STLD plans are permissible.

In its lawsuit, ACAP argued that allowing such plans to exist was driving membership declines in ACA-compliant coverage. The trade group lost at the district court level before appealing to the D.C. Circuit Court.

According to a July 17 Health Affairs blog post by Katie Keith, a health care lawyer and principal at Keith Policy Solutions LLC, studies by the House Energy & Commerce Committee, Kaiser Family Foundation and CMS have all found that “the sale of [STLD plans] raises premiums for people with preexisting conditions who purchase coverage in the ACA markets.”

However, Joseph Antos, a resident health care scholar at the right-leaning American Enterprise Institute, argues that the impact of STLD plans on the health insurance market at large is overstated. He observes that STLD plans are mainly appealing to people who earn too much to qualify for ACA premium subsidies but don’t have a viable employer-sponsored insurance option.

“The only people who have really left the exchanges market are the people who didn’t get very substantial premium subsidies,” he tells AIS Health.