No One’s Sure What UnitedHealth Reversal Means For Obamacare

UnitedHealth is the biggest USA health insurer and if it is going to face mounting losses due to Affordable Care Act’s exchange, the same thing might be happening with other health insurers across the US.

Aetna and Anthem said in regulatory filings that their individual insurance businesses, which include the plans created by President Barack Obama’s national healthcare reform law, had performed in line with projections through October.

Aetna CEO Mark Bertoloni said last month that despite plans to withdraw from exchanges in two states, while adding plans in one state, Aetna views the exchanges “as a long-term market potential”. That’s down from its previous forecast for $6.25 to $6.35 per share.

S&P Capital IQ analyst Jeffrey Loo said in a research note that he was “a bit surprised” by the revelation because UnitedHealth had previously “indicated optimism” about the exchanges.

Tim McBride, a health care economist at Washington University, says the big insurer’s bombshell is just part of a natural sorting-out process.

“This is still not a profitable market for insurers”, he said. Perhaps that’s why the nation’s biggest healthcare provider is seriously considering pulling out of ObamaCare, a move that would force more than a half million customers off their plans.

Competitors’ mixed-bag resultsAetna and Anthem are also struggling to make money on the marketplaces, but neither of them appear willing to walk away from Obamacare – at least not yet. Patients with medical needs who had not been able to find coverage were more likely to enroll first in these exchanges, ahead of healthy patients who would contribute premium payments but not use as much health care. United’s comments about the health of exchange-plan holders also run counter to what was expected. Even UnitedHealth Group Inc. rose $2.34, or 2.1 percent, to finish at $112.97.

Shares of all three tumbled Thursday after UnitedHealth’s announcement.

The company’s threatened withdrawal also puts more pressure on regulators to scrutinize the proposed mergers of its rivals: Anthem with Cigna and Aetna with Humana. Covered California, the state’s individual plan exchange, limited UnitedHealth to selling 2016 in a few smaller markets, as my colleague Chad Terhune reported, because the company left the state’s individual market in 2013 and spurned the launch of the exchange. The Affordable Care Act has proven this time and again since the very beginning. “Today’s statement by one issuer is not indicative of the marketplace’s strength and viability”.

Insurers may start attracting more healthy customers to their exchange business in the coming years because a penalty that the overhaul imposes on those who remain uninsured will grow, Lekraj said.

UnitedHealth has about 500,000 members with Obamacare plans, making it the fourth-largest insurer on the exchanges. Initially the health insurers opposed to the law vehemently, and then the Supreme Court challenged its provisions. HHS has said it expects about 10 million people will be enrolled at the end of 2016, compared with 9.1 million at the end of this year.

Kaiser Permanente, a hospital and insurer system, also said that it was “strongly committed” to the exchanges.

“In recent weeks, growth expectations for individual exchange participation have tempered industry-wide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step”, CEO Stephen J. Hemsley said in the report.