UnitedHealth may leave Affordable Care Act over losses

While UnitedHealth has been slower than a few of its rivals to sell Obamacare policies, the announcement may indicate that other insurers are struggling, said Sheryl Skolnick, an analyst at Mizuho Securities.

On Thursday, officials from UnitedHealthcare Group said they were considering dropping out of the government’s individual marketplace, citing “higher risks and more difficulties while our own claims experience has deteriorated”. “I think we’ll see strikingly better performance on the insurance exchange business”, Dave Wichmann, UnitedHealth’s chief financial officer, said on the call. Enrollment opened earlier this month.

UnitedHealth Group’s revised 2015 net earnings outlook of approximately $6 per share reflects expected pre-tax earnings pressure of $425 million or $0.26 per share, including $275 million related to the advance recognition of 2016 losses. However, with a presidential election coming up in 2016, many believe that the Affordable Care Act’s days could be numbered.

Other health care stocks fell as well, ranging from 6.5 percent for Aetna to 6.9 percent for HCA Holding to 8 percent for Tenet Healthcare.

Shares of Aetna Inc., Anthem Inc. and UnitedHealth all are climbing in premarket trading. In fact, the insurer has blamed the federal health care law for permitting people to change plans.

Not all companies may be jumping ship – USA Today reported that privately-held Kaiser Permanente won’t abandon the exchanges and remains ‘strongly committed, ‘ as CEO Bernard Tyson said in a statement. As of October 16, one-third of co-ops and insurance plans created under the ACA plan to fold by the end of the year.

CEO Stephen Hemsley told analysts that the company would have earned more than $6.40 per share this year if it had done no business on the exchanges. The company stayed out in 2014, the first year they were in operation, and this year it offered plans in fewer than half the states.

Members at Family First Health said when it comes to enrolling for health insurance through the Affordable Care Act, oftentimes choices are ignored. The analyst also wondered whether it was a viable exchange plan since one of the biggest health insurer failed to make money on the exchanges.

“We can not sustain these losses”. Blue Cross Blue Shield said it lost $282 million in 2014 due to these plans, while Aetna and Anthem have said they have faced troubles, though they have yet to publicly threaten to abandon the marketplaces.

“This is further indication that statements from one issuer are not reflective of the marketplace’s overall strength going forward”, said Ben Wakana, spokesman for the Department of Health and Human Services. UnitedHealth will be offering plans in the state for the first time in 2016, after sitting out the first two years of the Obamacare individual market. United’s comments about the health of exchange-plan holders also run counter to what was expected.

“This has been a very challenging market; it’s still a market in transition”, said Krusing. However, five years later with enrollment numbers steadily increasing and heated debates over the law dying down, Obamacare is still under threat as several factors continue to weigh on the new healthcare system’s future success.

An exit could, however, affect prices on the exchanges.

The Obama administration’s low predictions for 2016 enrollment may also have “spooked the insurance industry a bit”, Levitt said. In order to recover from losses, insurers have been raising premiums on the coverage that they provide.

UnitedHealth is not the only health care insurer who has come out in the open sounding alarm bells.

In MA, which elected to expand Medicaid coverage, BlueCross/BlueShield has been the largest insurer of individuals on the exchange.

Not all insurers sustained heavy losses on the government exchange.