By comparison, 824,000 people bought plans from Anthem, 815,000 through Aetna and 610,000 through Humana.
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Facing major losses in its Obamacare business, UnitedHealth said Thursday it would evaluate the viability of its exchange offerings in the first half of 2016.
Aetna is losing money on that business, company CFO Shawn Guertin said at a Credit Suisse health care conference earlier this year.
CEO Stephen Hemsley told investors Thursday that the company doesn’t intend to take further losses in 2017. ‘We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself’.
Moreover, a deterioration in the exchanges in the middle of the 2016 election campaign can give Republican candidates reasons to oppose the health care law created by U.S. President Barack Obama.
That focused attention on the other, larger players in the Affordable Care Act marketplaces where millions of Americans purchase insurance – Anthem and Aetna. With 29 million people still uninsured, getting more people to sign up is “the critical thing going forward”, says Sara Collins, vice president for health care coverage at the Commonwealth Fund. As more young people buy insurance “it should improve the risk pool”, she says. It now expects earnings of about $6 per share. If it happens then the insurer will be among more than half of the non-profit insurance cooperatives that have also withdrawn from the Obamacare exchanges this year.
UnitedHealth’s downgrade of its financial forecast included a warning that it would report lower revenue of $425 million this quarter than expected, or 26 cents in earnings per share in losses.
UnitedHealth has already pulled back on its marketing efforts for individual exchange products in 2016, it said. For next year, it forecast earnings of $7.10 to $7.30 per share. Analysts on average are expecting $7.28, according to Thomson Reuters I/B/E/S. UnitedHealth approached the exchanges more cautiously than its competitors during their first year and, today, it has just a bit more than 500,000 exchange enrollees.
More than 9 million people are enrolled through the exchanges, which operate in each of the 50 states and the District of Columbia.
If an insurer’s target amount exceeds its allowable costs by more than a certain percentage, it pays into the program.
UnitedHealth also cut its earnings outlook on its weak view of the exchange plan business. Clearly, UnitedHealthcare’s Hemsley wasn’t handed such a massive pay hike for providing Americans with ultra-affordable insurance policies; rather, he has been rewarded for the fact that its premium income has consistently outpaced the cost of the medical care it has had to provide, and its profits have soared.
S&P Capital IQ analyst Jeffrey Loo said in a research note that he was “a bit surprised” by the revelation because UnitedHealth had previously “indicated optimism” about the exchanges.
We rate AETNA INC (AET) a BUY. During the Obamacare debate, Democrats were divided over whether they ought to pursue a comprehensive overhaul of federal health insurance policy or if they should instead pass a “skinny bill”, an incremental, stripped-down version of Obamacare that would just include popular provisions like expanding Medicaid and imposing new consumer-friendly regulations on insurers. The optimistic, and plausible, interpretation of these developments is that they represent the predictable, and ultimately inevitable, gyrations of a brand new insurance market.
“This year, people looking for coverage in the Marketplace continue to have a robust number of plan choices and as the data shows the Marketplace is stable, vibrant and a growing source of coverage for new consumers”, he added.
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Aetna officials remain committed to the exchanges and will be “continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market”, Chief Executive Officer Joseph Swedish said in a statement.
