Health insurance stocks rebounded Friday after Anthem and Aetna reaffirmed their earnings forecasts, and sought to reassure investors and consumers that they remained committed to Obamacare exchange markets.
While smaller rivals also said they weren't experiencing the kind of difficulties which prompted the nation's largest insurer, UnitedHealth Group, to cut its guidance Thursday, due to losses on Affordable Care Act plans.
The health insurer sector rose nearly 3 percent Friday, with Aetna shares climbing 4.5 percent and Anthem gaining 2.7 percent.
Anthem's president and CEO, Joseph Swedish, issued a statement saying the insurer was looking to improve the dynamics of the exchange market, in the wake of United's threat to exit the exchanges in 2017.
"As a leader during this time of unprecedented transformation in health care, Anthem remains committed to enhancing access to high-quality, affordable health care for all of our members inside and outside of the insurance exchanges, and continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market," Swedish said in a statement.
In an 8-K regulatory filing with the SEC, Aetna reaffirmed its full-year earnings guidance of $7.45 to $7.55 per share, and stated that its individual commercial business has continued to perform in line with its projections through October.
UnitedHealth cited deteriorating trends in its exchange business during October, and high medical costs as a drag on its earnings. In addition, the insurer said it was contemplating exiting the Obamacare exchange market in 2017, raising concerns about the viability of the insurance exchanges, and sending the health insurance sector tumbling.
"We are surprised by United's announcement. We're doing fine," said Dr. Mario Molina, president and CEO of Molina Health in a phone interview. Molina is Medicaid-focused insurer, which has targeted low-income exchange members.
"I think a lot of the commercial plans went into this very aggressively in the first year and have been backpedaling a little bit," Molina said, noting that while his company's exchange market share is smaller than the larger carriers, their plans have been profitable. "Our approach is different, and our networks are different."
Molina Health's larger rival in the Medicaid market, Centene, also told analysts and investors that the exchange markets were performing as expected.
Leerink analyst Ana Gupte noted United's peers are also finding it challenging to be profitable on the exchanges, but they have priced plans more conservatively, and already incorporated that into their guidance. As a whole, she doesn't see United's warning and possible exit as a bad omen for the exchange markets.
"We remain positive on managed care as we see this as a temporary headwind that will be rectified through market exits by health plans for 2017 or through policy changes given all major publicly traded insurers are seeing the same issues," Gupte said in a note to clients.
Addressing one of the regulatory issues late Thursday, the Obama administration reiterated its reinsurance commitments that were supposed to help offset plan losses on high-cost patients for first three years of the Obamacare rollout.
"On October 1, (the Department of Health and Human Services) announced that for the 2014 benefit year, it would pay out $362 million in program funds, or roughly 12.6 percent of the $2.87 billion of funds requested," wrote analyst Chris Rigg of Susquehanna Financial Group in a note to clients, while saying it will make up that shortfall in its reimbursement for 2015 and 2016 plan benefits.
While others may not make threats to the leave the Obamacare market, Rigg said the landscape remains challenging for a number of carriers. Nearly a dozen nonprofit cooperative carriers which launched in 2014 have been shuttered because of steep losses.
"It is unclear whether the announcement was a response to United's disclosures yesterday, but practically we think HHS' announcement will matter little if it takes several years for the government to meet its risk corridor financial obligations — the damage will likely have been done if plan shut downs/exits continue," Rigg wrote Friday.