UnitedHealth Group cuts earnings outlook on exchange woes

UnitedHealth Group Inc., the biggest USA health insurer by revenue, slashed its full-year outlook Thursday and said it is evaluating the extent to which it will continue to serve the public exchange markets in 2017.

UnitedHealth’s shares fell 3.8 percent to $112.80 in light premarket trading.

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.

“In recent weeks, growth expectations for individual exchange participation have tempered industrywide, cooperatives 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”, UnitedHealth Group CEO Stephen J. Hemsley said.

It’s a swift turn of events for the nation’s largest health insurer, which only a month ago touted its exchange strategy and said it was expanding into 11 new markets next year.

The company trimmed 26 cents per share from its projection for fourth quarter earnings.

UnitedHealth blamed “a continuing deterioration” in the financial prospects of health care plans provided to individuals who purchase insurance through exchanges established by Obamacare. There’s also another $200 million to $225 million in potential exchange losses that can’t be booked until next year, the Minnetonka, Minnesota-based health insurer and services conglomerate said.

While acknowledging UnitedHealth was slower than a few rivals to sell Affordable Care Act policies since the exchanges opened, Bloomberg was told its withdrawal would be a “significant blow” to the program, and “may indicate that other insurers are struggling”. For these plans, which will take effect in 2016, many insurers have raised premiums in order to cover the medical costs of enrollees, which have run higher than many companies originally projected, fueling this year’s losses. Leerink Swann reaffirmed a “buy” rating on shares of UnitedHealth Group in a research note on Monday, October 19th. They have been among the most active users of the insurance plans.

On the other hand, the remaining business tends to be in line with the expectations. Aetna Inc. said it expects to lose money on its exchange business this year, but hopes to improve the result in 2016.

An analysis by the Robert Wood Johnson Foundation found that a number of insurers are cutting preferred-provider-organization plans, which tend to have more open access to health-care providers. OptumHealth is a wellness and health company serving the emotional physical and fiscal needs of people.