“In the early stages of any marketplace, companies are figuring it out and there are winners and there are losers, and United is signaling, ‘Hey, we are one of those who lost, ‘” she said.
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UnitedHealth’s (UNH) announcement Thursday to reevaluate its participation in the Affordable Care Act’s insurance marketplace sparked fear for investors in the health-care sector, and ignited a conversation about the future of the exchanges.
UnitedHealth Group “is insulated in part from the exchange issue because it entered late and in a more limited way than peers and because it has a more diversified business model within benefits and across services than peers”, wrote Sheryl Skolnick, an analyst with Mizuho Securities USA, in a note to investors Thursday.
Aetna said it still expected 2015 operating earnings of $7.45 to $7.55 per share, and Anthem reiterated its outlook of $9.53 to $9.63 per share.
The individual insurance exchanges created by Obamacare may be in long-term peril after the country’s largest health insurer said Thursday that it may pull out of the program in 2017.
“We can not sustain these losses”, chief executive Stephen Hemsley told analysts on a conference call.
UnitedHealth, one of the nation’s biggest insurers, said it remains a strong supporter of sustainable efforts to ensure access to affordable, quality care and has advocated for this publicly for more than 20 years, including as one of the first businesses to focus on serving people through managed Medicaid and Medicare.
Suffering loss of profitability from the individual insurance policies sold on the exchanges, the health insurer decided not entertain such losses and even said that might exit this unprofitable market completely by 2017.
The news sent shockwaves through an already anxious healthcare marketplace, less than a month into this year’s open enrollment period for ObamaCare plans. The company stock is now priced at $103.58 a share.
UnitedHealth covers around 500,000 people through the public exchanges.
Kaiser Permanente, a hospital and insurer system that sells Obamacare plans in eight states and the District of Columbia, said in an emailed statement on Thursday that it was “strongly committed” to participating in the exchanges. However, that may change in a few years as the financial penalties of not having health insurance coverage get steeper. They also didn’t know whether the new business would attract enough healthy customers to balance the expected enrollment of sicker customers who had previously not been able to find coverage.
“While there have been challenges at times, we believe at the end of the day [the exchanges] are causing healthy disruption, and are forcing the health care industry to respond better to consumer needs”, he said. It now expects earnings of about $6 per share.
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In 2014, the company said ACA “negatively impacted full year net earnings by $1 billion or approximately $1.00 per share”. Most policyholders receive government subsidies to help pay for the plans, based on household income. Although UnitedHealth provides coverage for about 6 percent of the 9 million people enrolled in ObamaCare (565,000 customers), this could be a bellwether of similar moves from other insurers such as rivals Anthem and Aetna who provide coverage for about 1.6 million people combined.
