CEO Stephen Hemsley said on an earnings conference call Tuesday that the exchange market is proving to be smaller and riskier than UnitedHealth had expected, meaning “we can not broadly serve it on an effective and sustained basis”. But the company then expanded to two dozen exchanges past year and said in October that it would add to that total. In the call, executives said they cover 795,000 people through the exchanges, and expect that number to drop to 650,000 by December.
Advertisement
Ana Gupte, New York-based managing director and senior research analyst at Leerink Partners L.L.C., said in a report Wednesday that Leerink does not “expect mass exodus from the exchanges by other plans” as other insurers, such as Aetna Inc. and Anthem Inc., are busy closing mergers and have more revenue tied to the individual health insurance market. In January, UnitedHealth said it expected to lose $1 billion from the exchanges over 2015 and 2016. As the Affordable Care Act’s $20 billion “reinsurance” subsidy for health insurance comes to an end, “more carriers will likely be taking a hard look at whether it remains financially feasible for them to continue offering exchange coverage”, he wrote.
Publicly traded, Medicaid managed-care insurers Molina and Centene both profited from exchange coverage, according to Haislmaier.
Losses from participating in the ACA exchanges are leading UnitedHealth to exit the individual marketplace in several states.
The impacts of a UnitedHealth withdrawal would vary considerably by state and market area, with a more pronounced effect in rural areas.
Apart from the Obamacare exchanges, United’s business is strong. The insurer lost $475 million in 2015, a spokesman said. Right now, we don’t know which states will still have UnitedHealth as an option next year.
UnitedHealth Group Inc. said it would remain in only a very small number of the Affordable Care Act’s marketplaces next year and suggested that it doesn’t now see a way to run the business effectively.
UnitedHealth added 2 million people domestically in the past 12 months, including 1.3 million more in the first quarter.
The biggest U.S. insurer plans to remain in “only a handful” of the 34 ACA marketplaces in which it operates this year. “We will be down to a handful of states that we will be actively participating in the exchanges”, was all he said.
Most health insurers have endured exchange business losses, but observers don’t expect other major exchange players to follow in UnitedHealth’s footsteps and drop out. Adjusted earnings jumped 17% to $1.81 per share, versus the first quarter of 2015, beating analysts estimates by nine cents, according to Zacks Research. The company also raised its forecast for 2016 and announced first-quarter results that beat expectations.
Advertisement
UnitedHealth has not released a list of the states where it is bailing out of the program, but the Insurance Journal, an industry publication, identified the following states where regulators say they have been notified UnitedHealth will not write business next year: Alabama, Georgia, Missouri, Pennsylvania, Arkansas, Louisiana, Nebraska, Tennessee, Colorado, Maryland, North Carolina, Texas, Connecticut, Michigan, Oklahoma and Washington.
