The news had dragged down shares of health insurers and hospital operators on Thursday.
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While UnitedHealth has been slower than a few of its rivals to sell Obamacare policies, the announcement may indicate that other insurers are struggling, said Sheryl Skolnick, an analyst at Mizuho Securities.
The two insurers are on the hot seat now that UnitedHealth Group Inc. appears unlikely to linger as a seller on the Affordable Care Act’s government-run markets.
“As we’ve seen during the first two weeks of open enrollment, every day, tens of thousands more Americans turn to the health insurance marketplace for health coverage and even more return to the marketplace for another year”, said Aaron Albright, spokesman for the Centers for Medicare and Medicaid Services, which oversees Obamacare. The company says that it has sustained heavy losses in selling insurance on the Obamacare exchanges. They also said their commercial business has developed as expected through October. It’s taking actions to scale back Obamacare plans in 2016 and isn’t sure if it’ll stick around for 2017. The health insurance firm will also record costs of $275 million in the fourth quarter of the current year.
UnitedHealth expects 2015 earnings of about $6 per share, down from its previous forecast for $6.25 to $6.35 per share. The Obama administration has been loath to reopen the law with Congress, given that many Republicans vow to repeal it. But the White House has to acknowledge that changes are needed now. (NYSE:ANTM) stock falling 9% and UnitedHealth stock falling 6%.
Not all companies may be jumping ship – USA Today reported that privately-held Kaiser Permanente won’t abandon the exchanges and remains ‘strongly committed, ‘ as CEO Bernard Tyson said in a statement. The company sought permission in January to sell statewide, but California officials limited the insurer to several smaller markets for 2016. The goal was to widen health insurance coverage while ensuring that people wouldn’t just sign up once they were sick, which would raise the costs for insurers considerably. However, with a presidential election coming up in 2016, many believe that the Affordable Care Act’s days could be numbered.
“There’s a broad coalition out there of business groups and other groups that want to see these dollars going into their states”, Cancelmi said. If all of these pieces were to fall into place and this situation occurred, the new administration’s reformed healthcare plans would also play a role in determining how businesses in the healthcare sector perform in the lead up to Obamacare’s demise. It plans to participate on individual exchanges in 15 states next year, down from 17 states in 2015.
The disclosure by UnitedHealth Group Inc., which had just last month sounded optimistic notes about the segment’s prospects, is the latest sign that many insurers are finding the new business unprofitable, despite an influx of customers that has helped swell revenues. The move has affected more than 200,000 people here and forced them to scramble for new coverage.
Even though UnitedHealth wasn’t a major player yet on the ACA exchanges, the fact that it priced plans conservatively and entered cautiously made its statements more significant, Hempstead said. This year, the marketplaces saw enrollment of more than 9 million customers, although the law’s expansion of Medicaid enrollment in many states has also played a large role in reducing the overall number of uninsured.
“We continue to expect exchanges to develop and mature over time into a strong, viable growth market for us”.
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High premiums could discourage younger, healthier people from enrolling.
