Health May Quit Obamacare in Blow to Health Law
(NaturalNews) The biggest U.S. health insurer is considering pulling out
of Obamacare as it loses hundreds of millions of dollars on the
program, casting a pall over President Barack Obama's signature domestic
policy achievement. (Story by Zachary Tracer, republished from Bloomberg.com.)
UnitedHealth Group Inc. has scaled back marketing efforts for plans sold to individuals this year and may quit the business entirely in 2017. It's an abrupt shift from October, when the health insurer said it was planning to sell coverage through the Affordable Care Act in 11 more states next year, bringing its total to 34. The company also cut its 2015 earnings forecast.
While millions of Americans have gained coverage under Obamacare since new government-run marketplaces for the plans opened in late 2013, in UnitedHealth's case they haven't been the most profitable. Customers the company has added have tended to use more medical care. UnitedHealth also said today that some people are signing up for coverage, getting care and then dropping their policies.
"We cannot sustain these losses," Chief Executive Officer Stephen Hemsley told analysts on a conference call. "We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself."
UnitedHealth said it expects as much as $500 million in losses on the Obamacare plans in 2016. The insurer will record $275 million of the costs in the fourth quarter. United also said Thursday it's booking $350 million in losses tied to the 2015 performance of its ACA plans.
The company's shares fell 5.6 percent to $110.63 at the close in New York. Anthem Inc. and Aetna Inc., the two biggest health insurers after UnitedHealth, also declined, as did hospital stocks including HCA Holdings Inc. and Community Health Systems Inc.
Insurance markets rely on premiums paid by healthy people to subsidize the medical costs of the sick. If an insurer sets premiums that are too low or attracts customers that are too sick, it can suffer losses. That can be a particular risk in new markets that an insurer may not be as familiar with.
While UnitedHealth has been slower than some of its rivals to sell Obamacare policies, the announcement may indicate that other insurers are struggling, said Sheryl Skolnick, an analyst at Mizuho Securities.
"If one of the largest and presumably, by reputation and experience, the most sophisticated of the health plans out there can't make money on the exchanges, then one has to question whether the exchange as an institution is a viable enterprise," Skolnick said.
New EnrollmentThe Obama administration pointed out that many people are signing up for Affordable Care Act policies. About 1.1 million people have signed up for coverage in the first two weeks of enrollment, which began on Nov. 1. That's a faster pace than last year, though the second week of sign-ups in 2014 included the Thanksgiving holiday week.
"The reality is we continue to see more people signing up for health insurance and more issuers entering the Marketplaces," Ben Wakana, a spokesman for the Department of Health and Human Services, said by e-mail. "Today's statement by one issuer is not indicative of the Marketplace's strength and viability."
UnitedHealth said it suspended marketing of its individual exchange plans and is cutting or eliminating commissions for brokers who sell the coverage in many markets.
550,000 in ObamacareUnitedHealth covers fewer than 550,000 people on the Obamacare exchanges. About 9.9 million people had insurance through the U.S.- and state-run insurance markets as of June 30.
"The company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017," UnitedHealth said in a statement Thursday announcing the changes.
Last month, UnitedHealth had struck a more optimistic note.
"I think we'll see strikingly better performance on the insurance exchange business" next year, Chief Financial Officer David Wichmann told analysts on an Oct. 15 conference call.
Other insurers have struggled to profit from the government-run marketplaces created by Obamacare. About a dozen non-profit "co-op" plans created under the Affordable Care Act have failed, after charging too little to cover the cost of patients' medical care, and because an Obama administration fund designed to stabilize the market paid out just 12.6 percent of what insurers requested. And Anthem last month said some rivals were offering premiums too low to provide the coverage patients require and book a profit.
Anthem and Aetna have said they'll be patient as the exchange business develops, and that they expect it to eventually become profitable. Aetna has about 1.1 million individual exchange members and Anthem has 824,000.
"It's way too early to call it quits on the ACA and on the exchanges," Aetna CEO Mark Bertolini said on an Oct. 29 conference call. "We view it still as a big opportunity for the company."
Still, Bertolini said the market "remains challenging," and Aetna reduced the number of states where it sells coverage to 15 for next year from 17. Cynthia Michener, an Aetna spokeswoman, declined to comment Thursday.
Anthem said in late October that the company may need to wait until 2017 or 2018 for the individual exchange business to improve. Jill Becher, a company spokeswoman, said Thursday that the insurer had nothing to add beyond those remarks.
UnitedHealth also said Thursday that earnings per share will probably be $6 this year, down from a range of $6.25 to $6.35, reflecting a "continuing deterioration in individual exchange-compliant product performance. Next year, earnings per share will be between $7.10 and $7.30, the first time it has given 2016 estimates.
Read more at Bloomberg.com.