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Nation's largest insurer may exit Obamacare due to losses
By PHILIP KLEIN ( @PHILIPAKLEIN)
11/19/15 8:04 AM
washingtonexaminer.com
UnitedHealth Group, the largest insurance company in the U.S., on Thursday slashed its earnings outlook, citing new problems related to Obamacare, and told investors it may exit the program's exchanges.
"In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated," Stephen J. Hemsley, chief executive officer of UnitedHealth Group, said in a press release.
The release added that, "UnitedHealthcare has pulled back on its marketing efforts for individual exchange products in 2016. 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."
The company said it expects "earnings pressure" of $425 million, which "is driven by projected losses on individual exchange-compliant products related to the 2015 and 2016 policy years."
Insurers have had trouble signing up young and healthy individuals on the Obamacare exchanges, which is necessary to offset the costs of covering older and sicker enrollees. This has forced insurers to hike premiums, raise deductibles, and slash the number of doctors and hospitals offered on its plans. Meanwhile, the Obama administration has cut its enrollment expectations for 2016 to about half of what they were when the the legislation became law.
In a conference call with investors, Hemsley offered a sober assessment of the exchanges' future viability. He said that claims data have been getting worse as time has gone on, and there's no evidence pointing toward improvement.
Asked about whether the company could sustain losses past 2016, he was blunt: "No. We cannot sustain these losses. We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself."
The year 2017 is significant for insurers, because that's the year when several programs designed to mitigate risk for insurers through federal backstops go away. The hope was that those programs would act as training wheels for Obamacare in its first few years of implementation, but after that, the insurers were supposed to be able to thrive on their own. UnitedHealth's statement suggests otherwise.
If UnitedHealth and other insurers decide to exit, remaining insurers will be forced to take on even more high-risk enrollees, prompting them to either raise rates further or exit themselves. That in turn would deprive individuals of choices and remove competition, a key purpose of the exchanges. |
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