UnitedHealth says it should have waited on Obamacare

December 1, 2015

UnitedHealth Group Inc. should have stayed out of Obamacare’s new individual markets longer, the CEO of the biggest U.S. health insurer said Tuesday, after announcing last month that it will take hundreds of millions of dollars in losses related to the business.

While the company’s other lines of business are growing, instead of deciding to expand into Obamacare next year, the company should have kept waiting, UnitedHealth CEO Stephen Hemsley said at an investor meeting in New York.

“It was for us a bad decision,” Hemsley said. “I take accountability for sitting out the exchange market in year one so we could in theory observe, learn and see how the market experience would develop. This was a prudent going-in position. In retrospect, we should have stayed out longer.”

UnitedHealth said on Nov. 19 that it may quit selling coverage in the Affordable Care Act’s individual markets in 2017. The markets are a key element of the law’s goal to cover about 10 million Americans next year, and UnitedHealth had expanded its offerings for 2016, after initially holding off when the markets started covering people in 2014.

Losses from the plans this year and next will total more than a half-billion dollars, the company has said, and UnitedHealth will scale back efforts to market coverage to millions of people shopping for 2016 insurance on the Affordable Care Act’s new marketplaces.

Not alone

UnitedHealth is not alone in its Obamacare struggles. Other insurers, including Indianapolis-based Anthem Inc. and Aetna Inc., have also either suffered losses in the markets or said they haven’t seen the margins they expected. In Indiana, about half the insurers in the Obamacare market are losing money, according to third-quarter financial filings with the Indiana Department of Insurance.

Next year will be the law’s third of providing coverage.

“It will take more than a season or two for this market to develop,” Hemsley said. “We did not believe it would form this slowly, be this porous, or become this severe.”

Hemsley said Tuesday that the rest of UnitedHealth’s businesses are faring better than its comparatively small exchange operation, which it has said covers about 540,000 people. The company said it expects operating earnings of $13.1 billion to $13.5 billion next year, on revenue of $180 billion to $181 billion.

Enrollment at the company’s insurance businesses will climb to a range of 47.4 million to 48.2 million people next year, from 46.2 million at the end of 2015. The company is projecting more enrollees in line of business including Medicare Advantage and Medicaid. Separately, UnitedHealth said its drug-coverage business for the elderly, Medicare Part D, may lose as many as 650,000 customers.

Across all of its insurance businesses, UnitedHealth said it expects to spend about 81.5 cents of every dollar it takes in from premiums on medical expenses.


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