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UnitedHealth may quit Obamacare market in blow to health law

November 19, 2015

The U.S.’s biggest health insurer is considering pulling out of Obamacare, a month after saying it would expand its presence in the program.

UnitedHealth Group Inc. is scaling back marketing efforts for plans it’s selling this year under the Affordable Care Act, and may quit the business entirely in 2017 because it has proven to be more costly than expected. It’s an abrupt shift from October, when the health insurer said it was planning to sell coverage in 11 new markets next year, bringing its total to 34. The company also cut its 2015 earnings forecast.

UnitedHealthcare covers about 28,000 Hoosiers via the Obamacare exchange.

A pull-back would deal a significant blow to President Barack Obama’s signature domestic policy achievement. While UnitedHealth has been slower than some of its rivals to sell Obamacare policies since new government-run marketplaces for the plans opened in late 2013, 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.

UnitedHealth said it suspended marketing its individual exchange plans and is cutting or eliminating commissions for brokers who sell the coverage.

UnitedHealth covers fewer than 550,000 people on the Obamacare exchanges. About 9.9 million people who 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 written statement Thursday announcing the changes.

The company’s shares fell 5.6 percent, to $110.66 each, Thursday morning shortly after the market opened.

Shares in Indianapolis-based 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.

Anthem shares fell 6.5 percent, to $128.37.

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.

Insurers have struggled to profit from the government-run marketplaces created by Obamacare. About 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 said last month said some rivals were offering premiums too low to provide the coverage patients require and book a profit.

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.

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.
 

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