An article in the Wall Street Journal reports that the nation’s largest health insurer said it would pull out of nearly all of the Affordable Care Act’s exchanges, signaling continued instability in the law’s signature marketplaces as they head toward their fourth year.
After losses on the exchanges, UnitedHealth Group Inc. will pare its presence from 34 states this year to “only a handful” in 2017, said Chief Executive Stephen J. Hemsley during the company’s first-quarter earnings conference call Tuesday. Mr. Hemsley said that the “smaller overall market size and shorter-term, higher-risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis.”
UnitedHealth also steepened its projected loss on the 2016 exchange business to $650 million from around $525 million, amid signs that new enrollees’ health status appeared worse. The company booked a large chunk of that loss last year. UnitedHealth said it had approximately 795,000 exchange enrollees at the end of the first quarter.
The announcement follows on UnitedHealth’s earlier comments that it was reconsidering its presence in the ACA exchanges. So far, regulators in more than a dozen states have disclosed that UnitedHealth will withdraw from their health-law marketplaces. The departure of UnitedHealth would reduce the number of options for some consumers, particularly in certain rural and southern regions of the U.S. In some cases, according to a new analysis by the Kaiser Family Foundation, marketplace consumers might have only one insurer option, unless a new entrant emerges.
A spokesman for the federal Department of Health and Human Services said that it expects insurers to come in and out of state marketplaces, but it has “full confidence, based on data, that the marketplaces will continue to thrive for years ahead.”
The exchange business reflects a small share of UnitedHealth’s overall portfolio, and the company reported better-than-expected earnings for the first quarter and raised its guidance for the year, fueled by strong results from its Optum health-services arm and growing government business.
Like UnitedHealth, a number of insurers saw significant losses in 2015 on the exchanges, and many sought rate increases and tweaked their offerings for 2016 in hopes of improving results. Still some, like UnitedHealth are already projecting losses for this year – including Humana Inc., which has said it was evaluating its continued participation in the exchanges.
Many of the nonprofit cooperative insurers created by the law have already folded, but several of the remaining ones are in challenging financial positions, making their role in 2017 uncertain, said Deep Banerjee, an analyst with Standard & Poor’s Ratings Services.
Insurers also face a new challenge in 2017 because a reinsurance program created by the law, which helped reduce risk for the companies, is set to sunset, though the effect may be blunted next year by a one-year moratorium on a health-insurance tax. “The reinsurance money was a big supporting factor, and that is going away,” Mr. Banerjee said.
Analysts expect Blue Cross and Blue Shield insurers, the backbone of the exchanges in many states, to generally remain in the ACA marketplaces in 2017. The four other big national insurers are currently seeking federal approval for major mergers— Aetna Inc. to take over Humana, and Anthem Inc. to acquire Cigna Corp. —creating pressure to avoid torpedoing the Obama administration’s signature health marketplaces, analysts said, though some companies might tweak their offerings state-by-state.
In addition, some Medicaid-focused insurers, such as Molina Healthcare Inc. and Centene Corp. , which have seen profits on the exchanges, could expand into new states, suggested Ana Gupte, an analyst with Leerink Partners LLC.