Why Health Insurance Stocks Are Down Big Today

The marketplaces were launched by the federal Affordable Care Act, and are an option for individuals and families who buy non-group coverage.

Whether it’s co-ops closing or the nation’s largest insurer struggling, Clare Krusing – who’s with the trade group America’s Health Insurance Plans (AHIP) – said the net isn’t as strong as it needs to be.

UnitedHealthcare’s warning sent new shockwaves across the healthcare sector after weeks of mounting anxiety among private insurers whose participation in the exchanges is critical to the viability of the president’s signature law.

But UnitedHealth also endorsed its exchange business in October, when it said it would expand into 11 more exchanges next year after growing from four to 24 in 2015. United said Thursday it’s booking $350 million in losses tied to the ACA plans’ 2015 performance of its ACA plans. The nation’s largest health insurance provider dealt a blow to the Affordable Care Act on Thursday.

The Obama administration pointed out that many people are signing up for Affordable Care Act policies.

Three of UnitedHealth’s for-profit competitors – Aetna, Centene, and Molina – told the Swiss financial services company UBS on Thursday that they remained confident about their exchange business, even considering short-term financial pressures. Aetna said it still expected 2015 operating earnings of $7.45 to $7.55 per share, and Anthem reiterated its outlook of $9.53 to $9.63 per share.Leerink Partners analyst Ana Gupte said Aetna’s statement showed the company had already factored in the individual business’ challenges to its forecasts.

In response to these losses, UnitedHeath announced it will reduce its marketing efforts for these exchange plans when the current sign-up period ends and reconsider “to what extent it can continue to serve the public exchange markets in 2017”, suggesting potential withdraw from ACA altogether.

Still, he added, “there’s no question this is a much harder year for the exchange plans”.

UnitedHealth’s announcement is sure to raise more concerns about the sustainability of the public insurance exchanges.

UnitedHealth was in many markets where competitors could be helped by its departure, he said.

UnitedHealth shares fell 5.6%.

More than 500,000 Americans bought insurance coverage from UnitedHealth under the program. UnitedHealth, which sells plans in 35 states for 2016, has only about 5 percent of the overall 10 million or so customers of exchange plans now, and was a late, somewhat reluctant entrant to the Obamacare market.

Notably, the National Health Enrollment Center is not affiliated with the state’s insurance exchange directly.

“The reality is we continue to see more people signing up for health insurance and more issuers entering the marketplaces”, Ben Wakana, a spokesman for the Department of Health and Human Services, said in an e-mail. Anthem Inc. and Aetna Inc., the two biggest health insurers after UnitedHealth, also declined, as did hospital stocks including HCA Holdings Inc. and Community Health Systems Inc. That program, however, has paid only about 13 cents on the dollar of what was promised, mainly because fewer insurers than expected made money. What’s more, people shopping for coverage on the exchanges are finding that the policies have high deductibles and limited physician networks.

The health insurer’s move comes amid slowing growth in individual sign-ups for commercial ACA health plans, rising premiums, and increased costs for insurers as those who do enroll in the plans tend to run up larger medical bills.

Thanks to lackluster sales for 2015, the company adjusted its earnings forecast Thursday to reflect lower-than-expected revenue from the insurance plans sold through the exchange, revising it to $6 per share compared with an earlier target of $6.25 to $6.35.