UnitedHealth Group said Thursday that it is pulling back from its push into the Affordable Care Act’s public insurance exchanges only a month after touting future growth prospects for that business. The company says that it has sustained heavy losses in selling insurance on the Obamacare exchanges.
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CEO Joseph Swedish said in a statement that the insurer remains committed to the business and “continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market”.
He said this would be still an improvement over the market for individual insurance before the Affordable Care Act, when companies could turn people away for pre-existing conditions and employ underwriting to charge higher prices to people it expected to visit the doctor more often and require more prescriptions.
In late October, Anthem Chief Financial Officer Wayne DeVeydt said the company is willing to wait a few years for the Obamacare exchange business to improve. These stocks were untraded premarket on Friday. People who purchase insurance through the public exchanges are typically heavy users of their plans, draining insurers’ profits, analysts say.
Insurers may start attracting more healthy customers to their exchange business in the coming years because a penalty that the overhaul imposes on those who remain uninsured will grow, Lekraj said.
“We’ve already succeeded once in stopping the Obama Administration from bailing out health insurance companies under ObamaCare, and it’s critical that Congress once again stand with taxpayers and stop any taxpayer-funded bailout of health insurers from happening”. For 2016, UnitedHealth sells one of the two lowest-cost silver plans available to more than 40% of the counties in the 38 states that use the federal Healthcare.gov exchange, Levitt said.
UnitedHealth has about 500,000 members with Obamacare plans, making it the fourth-largest insurer on the exchanges.
Looking aheadIt’s too early to determine what the fall-out may be for the Obamacare exchanges if UnitedHealth Group pulls the plug, but investors may not want to give up on owning insurers.
UnitedHealth had said it was seeing higher costs among these enrollees, suggesting consumers might be purchasing plans to cover imminent medical expenses.
The proposal does not provide a new source of money for those payments, but it would tweak the method used to calculate how much money each insurer needs to pay or is owed under a related program also meant to ease the burden on insurers with big pools of sick patients.
Aetna said it still expected 2015 operating earnings of US$7.45 to US$7.55 per share, and Anthem reiterated its outlook of US$9.53 to US$9.63 per share.
The same article said the company estimates losses of more than $600 million from its exchange business, before taxes, in 2015 and 2016. The company pointed out that certain people who were ready to sign up for coverage and get the necessary care before dropping their policies. In October, the U.S. Department of Health and Human Services forecast about 10 million people would have plans in 2016, significantly below industry expectations of 20 million. “I don’t think those patients are a whole lot different from those who come to us during open enrollment”, he said.
However, federal government spokesperson Jonathan Gold called the statement by one issuer “not indicative of the marketplace’s strength and viability”.
The company also issued a fresh guidance for 2016 saying that it expects earnings in the range of $7.10 and $7.30 per share.
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The Obama administration argued that the health care marketplace would stabilize after a normal period of changes in the early years following the law’s implementation. It is a risk that comes in fresh markets where the insurer would not have been familiar with.
