UnitedHealth CEO On Obamacare: ‘We can not Sustain These Losses.’

Many people signing up for 2016 health policies under the Affordable Care Act face higher premiums, fewer doctors and skimpier coverage, which threatens the appeal of the program for the healthy customers it needs.

What: Health insurance stocks got taken to the collective woodshed today after industry giant UnitedHealth Group warned that its individual exchange-compliant products are not performing as expected.

The company noted that it has scaled back its marketing efforts for individual exchange products and that it is now debating whether it should discontinuing offering them. But the company said its operating loss for the exchange business this year will amount to about $700 million, or 45 cents a share, including $275 million that will represent “advance recognition of losses” for 2016.

“We can not sustain these losses”, CEO Stephen Hemsley said Thursday.

“The reality is we continue to see more people signing up for health insurance and more issuers entering the Marketplaces, and at the end of January, we believe we’ll be looking at another successful open enrollment – just like the last two”, Wakana said.

Chief Financial Officer David Wichmann told analysts then that the company expected its exchange business to be “strikingly better” in 2016 and that the exchanges will mature into a strong growth market.

UnitedHealth shares sank more than 5 percent, or $6.31, to $111 in premarket trading Thursday.

Minnetonka-based UnitedHealth Group says it’s taking a financial beating on health plans sold through state and federal exchanges created as part of the federal Affordable Care Act and it may need to cut its losses.

The Obama administration’s low predictions for 2016 enrollment may also have “spooked the insurance industry a bit”, Levitt says. Meanwhile, health co-operatives that were formed to provide insurance through the exchanges are failing right and left, leaving at least 500,000 people without insurance, according to The Wall Street Journal.

“The combination of these factors suggests the overall exchange market profile is more negative than we had planned, with new market enrollment growth developing more slowly”, Hemsley said.

Obama administration officials note that despite UnitedHealth’s announcement, the number of insurers on government-run health exchanges will grow in 2016, with an average of 10 insurers per state, up from nine per state this year, and eight per state in 2014.

The electronics retailer said it expects “near flat” revenue in the fourth quarter – which includes holiday shopping. Insurance is priced based on expectations; if you expect to pay out more, you just raise the price.

The company’s exchange enrollment this year came to only about 540,000, out of total exchange enrollments of more than 9 million. UnitedHealth’s shares were down 3.6%. (People who make more than that aren’t eligible for subsidies.) But the moment that subsidies start costing the government more than 0.504% of GDP, which would now be about $85 billion, the expenditure is supposed to be capped, which would mean that subsidies would have to be decreased or withdrawn for a few folks.

UnitedHealth Group Inc. now expects 2015 earnings of about $6 per share, down from its previous forecast for $6.25 to $6.35 per share.

“We see this as a temporary headwind that will be rectified through market exits by health plans for 2017 or through policy changes”, Gupte wrote. (Among people who follow health care, the assumption is that HHS was deliberately conservative in its projection – and that actual enrollment will end up somewhat higher than 10 million.) Even the failure of the co-ops is also a more complicated story than it appears at first blush. About a dozen nonprofit cooperative health plans that sold plans on the exchanges have collapsed.

Insurers are struggling to attract enough healthy customers into their still-new exchange coverage to balance sicker patients who signed up for coverage quicker because they use a lot of health care.