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UPDATE 4-Anthem says may exit more individual markets over Obamacare funding

(Recasts, adds analyst)

July 26 (Reuters) - Anthem Inc said it may exit more individual Obamacare markets as the future of the national healthcare law and the government subsidies that make insurance affordable for millions of Americans remain up in the air.

Republican lawmakers are in the midst of a freewheeling debate to craft a bill that would end Obamacare, but the effort to roll back Democratic President Barack Obama's signature healthcare law faces significant hurdles.

The No. 2 U.S. health insurer and other healthcare companies have pressed lawmakers and government officials to continue funding the Obamacare program during a transition period and pay billions of dollars in medical care subsidies. U.S. President Donald Trump has threatened to cut off these payments.

Anthem, which sells Blue Cross Blue Shield plans in 14 states, has mostly pulled out of three states, including Indiana, where it had planned to sell 2018 plans in the individual market.

It has until Sept. 27 to pull out of the government-run marketplace for individual insurance.

The insurer has more than a million customers in Obamacare individual plans.

In many states, Anthem has asked for rate increases in 2018 of more than 20 percent to cover the high medical costs of members.

Without the government subsidies, it said it would need to raise rates another 20 percent, making the plans so pricey that they would only attract sick people. That would make profits elusive and further raise premium prices.

"There's a cascading effect," Chief Executive Joe Swedish said during a conference call to discuss the company's second-quarter earnings.

Anthem has advocated for continued government subsidies to make insurance affordable, rules that keep a balanced pool of healthy and sick customers and discourage enrollment abuse as well as the elimination of insurance taxes.

"We do believe that we have been heard," Swedish said.

NET INCOME RISES

Anthem, which scrapped its $54 billion deal to buy Cigna Corp in May, said net income rose to $855.3 million, or $3.16 per share in the second quarter, from $780.6 million, or $2.91 per share, a year earlier.

Excluding items, the company earned $3.37 per share, beating analysts' average estimate of $3.23 per share, according to Thomson Reuters I/B/E/S.

Anthem, which sells plans to employers as well as government-sponsored health insurance, said it now expects full-year adjusted profit to be greater than $11.70 per share, up from a previous forecast of at least $11.60.

That improved outlook was still below analysts' expectations of 2017 earnings of $11.78 per share.

Anthem shares fell $3.95, or 2.1 percent, to $186.63.

Leerink Partners analyst Ana Gupte said the shares were likely down because of investor disappointment over the conservative outlook for full-year 2017. (Additional reporting by Ankur Banerjee in Bengaluru; editing by Meredith Mazzilli and G Crosse)