The biggest US health insurer said it has suffered major losses on policies sold on the Affordable Care Act’s exchanges and will consider withdrawing from them, adding to worries about the future of the marketplaces at the heart of the Obama administration’s signature health law.
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The company will make market-by-market determinations in the first half of next year about whether it will continue selling products on the exchanges.
The main factor to cut the earnings and decrease the share profit is the loss in individual exchange-compliant performance.
UnitedHealthcare, the U.S.’s largest health insurer, says that it is considering quitting Obamacare in 2017, just a month after the company said that it planned to expand its presence in the Affordable Care Act’s online marketplace. Investor calls are not always the most reliable indicator of corporate intentions and, by itself, UnitedHealth’s dour pronouncement doesn’t say much about the health insurance exchanges as a whole.
“We can not sustain these losses”, Chief Executive Officer Stephen Hemsley told analysts.
In connection, the insurance company’s shares fell 5.5 percent on Thursday, while Aetna lost 7.2 percent and Anthem dropped 6.4 percent.
Health coverage saw gains in Colorado during the first two weeks of open enrollment, while the state still faces hard cost challenges.
The Connector is dominated by local, nonprofit insurers, including Neighborhood Health Plan, Harvard Pilgrim Health Care, and Tufts Health Plan.
The insurer covers about 500,000 people. Mr. Hemsley said that since then, the enrollment picture has become worse, and it has become clearer that the medical costs of new customers were unsustainable.
Kathy Hempstead, director of coverage for the Robert Wood Johnson Foundation, a health care think tank, said UnitedHealth’s announcement came as a surprise, though all the carriers have said the newly insured have been more intensive users of health care than they expected – and priced for.
UnitedHealth said it would decide whether to continue offering this coverage for 2017 by the middle of next year.
Not so fast, said Jeff Smedsrud, CEO of HealthCare.com, which runs a comparison-search service for finding health insurance coverage. “Today’s statement by one issuer is not indicative of the Marketplace’s strength and viability”.
After the Obama administration reported in February that 11.7 million Americans had selected marketplace plans, that number had fallen 15 percent by June, when officials reported just 9.9 million had continued paying the monthly premium.
The company trimmed 26 cents per share from its projection for fourth quarter earnings.
And even if they do leave, she said, there are plenty of other insurers to pick up their market share.
The insurer blamed the continuing deterioration in healthcare plans financial prospects provided to individuals purchasing insurance through the exchanges that Obamacare established.
UnitedHealth Group also announced it is revising down its earnings outlook for 2015 by about $6 per share, reflecting “expected pre-tax earnings pressure of $425 million”, including $275 million from “advance recognition of 2016 losses”. “They hope it will be at a few point, but it’s not there yet, and without a public option [a government-sponsored health plan] and with the co-ops exiting in much of the country, you know Obamacare needs private insurers to play”.
What UnitedHealth’s action suggests is that the company is not sure it can make money in this market at any price.
The Minnetonka, Minn. deals in two segments of UNH, insurance arm, and Optum, its health-care IT services.
Insurers have struggled to entice healthy customers to buy high-deductible insurance commonly sold on the exchanges.
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“American health care is undergoing significant change and evolution, and the health exchanges are part of that disruption”, said Bernard J Tyson, Chairman and CEO of Kaiser Permanente, a non-profit.
