UnitedHealth, the nation’s largest health insurer, has announced they will cut participation in Obamacare exchanges to only a handful of states, the Associated Press reported.
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UnitedHealth didn’t name the Obamacare markets that it’s exiting, though regulators have confirmed at least 13 withdrawals from the 34 states where the company sold plans this year. And on Tuesday, while reporting a better-than-expected first quarter, President Dave Wichmann said exchange losses in the year to date have already amounted to $125 million. The moves have been anticipated since late previous year when UnitedHealth executives said the insurer had suffered financial losses and threatened the insurer might leave the health exchanges altogether in 2017.
UnitedHealthcare said it has 795,000 enrollees on the exchange plans, after adding 300,000 people since January.
“The smaller overall market size and shorter term, higher risk profile within this market segment continue to suggest we can not broadly serve it on an effective and sustainable basis”, Unitedhealth’s CEO, Stephen J. Hemsley said. UnitedHealth officials have said the company potentially could lose as much as $1 billion by the end of this year.
Under the Affordable Care Act (ACA), all states have exchanges – most of which are federally run – that help consumers find and buy health coverage.
“We continue to remain an advocate for more stable and sustainable approaches to serving this market”, UnitedHealth CEO Stephen Hemsley told analysts during Tuesday’s call.
Since the Affordable Care Act has expanded, the health insurer can’t continue to serve the increased demands of the market.
The letter also stated that the insurer’s exit will not affect its other products being sold in the state, such as mall and large group insurance plans. Officials in CT say the insurer will also exit their state exchange in 2017. (KHN is an editorially independent program of the foundation.) That could mean higher premiums for consumers in states and counties left with only one or two insurers, unless another company enters those markets. “That data shows that the future of the marketplace remains strong”.
UnitedHealth cautiously came late to Obamacare a year ago and now holds a relatively small share of the overall business. “It was for us a bad decision”, Hemsley said in December 2015. California and Wisconsin have said they do not disclose companies’ plans until the list of participating companies is published each year.
Still, UnitedHealth’s overall revenue rose 25 percent in the first quarter and profits rose 14 percent – to $1.6 billion. A minimum of three insurers is generally considered to be sufficient for effective competition.
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The markets in these states are small and have higher risks for the company, according to the report. The insurer’s outlook for tame medical cost trends outside of exchange plans also gave a lift to shares of its rivals, Anthem (NYSE: ANTM) and Aetna (NYSE: AET), which report results next week.
