The company has 795,000 customers from the exchanges, more than half of them new to UnitedHealth, it said.
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UnitedHealth Group, the largest health insurer in the US, will withdraw from ObamaCare exchanges in most USA states.
Despite company’s expansion plans, UnitedHealth Group Inc. expects $650 million in losses in 2016, after already losing $475 million in 2015. While United is not alone in finding the new market challenging, some insurers, especially those that have traditionally served low-income customers in Medicaid programs, appear to be more successful.
A study by the Kaiser Family Foundation found that if UnitedHealth exited from the 1,855 counties where it competes, 29 percent would see the number of exchange insurers drop from two to one. The insurer also overpriced its plans in 2015 after barely participating on the exchanges in 2014. But despite those heavy losses, which UnitedHealth previewed late a year ago, the company’s other lines of business like Medicare Advantage and Optum have been making money at a healthy clip.
In Washington state, UnitedHealth was a relatively small player in the individual market, with less than 2 percent of enrollment, according to Pam MacEwan, CEO of the state’s health insurance marketplace.
The Congressional Budget Office has projected that the ACA will cover about 12 million people this year, providing tax subsidies that help consumers afford insurance offered through the exchanges.
“I think insurers will have to become more selective in terms of which exchanges and how they participate, but by far and away I think the United move will be the biggest one this year”, Mizuho Securities managing director Sheryl Skolnick told the AP. But given how new the ACA marketplaces are, they write that it’s “to be expected” that some insurers will leave the market if they aren’t able to offer competitive or profitable plans.
Health insurers have faced several challenges in building their exchange business.
“And they’ve been very public about their financial challenges”, she says, “setting premiums at the appropriate level considering the law’s regulations that they have to accept all patients, all consumers, all members to their insurance plans”. “This is ultimately going to be a 20 to 30 million person market, when it ultimately gets fixed”.
For every $1 of ACA-plan premiums paid by those covered, Blue Cross Blue Shield Nebraska spent $1.43.
According to the AP, industry watchers expect other insurers to tweak their marketplace participation for 2017 but don’t anticipate too many to follow UnitedHealth’s exodus from the exchanges.
The announcement comes after UnitedHealth increased its 2016 earnings expectations after the first quarter of 2016, when it brought in $44.5 billion in revenue, a 25 percent increase year-over-year.
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The market appeared to be responding favorably the results, with UnitedHealth’s shares (UNH) up 1.87% to $127.81 per share in early morning trading.
