UnitedHealth move isn’t the end for Obamacare

Hemsley said Thursday that UnitedHealth “remains hopeful” that the market will adjust, but his comments suggested otherwise. It turns out that more than 25 times as many people with income below twice the poverty level bought an exchange plan as people with incomes above four times the poverty level.

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. “It’s a wake-up call that there’s been a few pretty rough headwinds”. They say patients can get stuck with large bills if, for instance, they seek care at a hospital that is part of their insurer’s network and are treated while there by a doctor who is not in the network. “Both Aetna and Anthem have been much more aggressive in this area”. That helped their shares recover a few ground after a rout the previous day.

The S&P 500 index of healthcare facilities.SPCOMHCLT was up 2.9 percent Friday after falling 5.7 percent Thursday. UnitedHealth also rebounded, gaining 2.4 percent to $113.24. The company also indicated that it was booking $350 million losses that were linked to the current year performance of its ACA plans.

The company has about a half a million people enrolled in the exchanges, a relatively small amount in terms of the the 10 million expected to be enrolled in 2016, according to the NY Times.

UnitedHealth on Thursday said it would lose $425 million this year due primarily to its participation in Obamacare’s marketplaces and that it may exit the exchanges. The company stood by that outlook in a Friday regulatory filing. Affordability is absolutely critical across the board, because if we don’t have affordable plans we are not going to get universal coverage.

The move comes amid indications that insurers are absorbing steeper costs than they expected from plans offered to individuals through the public exchanges, which are purchased online.

Former insurance executive and consultant Robert Laszewski said the administration needs to relax the rules to give insurers more flexibility to design plans that would attract healthier people.

This caused speculation that UnitedHealth’s announcement was at least partially created to put pressure on the federal government to make promised reimbursements to offset losses incurred by qualified insurers in participating in the exchanges. In addition, the United States Department of Health and Human Services noted that the number of insurers participating in exchanges has increased from 9 per state last year to 10 per state this year. “A statement by one issuer is not indicative of the marketplace’s strength and viability”, said Aaron Albright, director of media relations at CMS, in an email response to a LifeZette inquiry.

Since November 2013, shortly after the Obamacare insurance exchanges first opened amid major technical snafus and missteps, no more than 54 percent of Americans have given solid grades to the quality of health care in this country. UnitedHealth isn’t an AHIP member. And don’t think for a minute that the other insurers find the ObamaCare economic model any more palatable.

“If exchange pricing/risk does not stabilize near-term”, Susquehanna analyst Chris Rigg wrote in a note, “we’d expect a quick rebound in profits as (UnitedHealth) exits this business line”. “When health plans can not rely on the government to meet its obligations, individuals and families are harmed as a result”. “The administration must act to ensure this program works as intended and consumers are protected”. Initially the health insurers opposed to the law vehemently, and then the Supreme Court challenged its provisions.

“We view it still as a big opportunity”, Bertolini said.