The nation’s largest health insurer is questioning its future in public insurance exchanges, the latest signal of major concerns about the online marketplaces that have helped the Affordable Care Act extend coverage to millions of people.
UnitedHealth Group said Thursday that it will scale back marketing for plans it sells on the exchanges and decide next year whether it will even stay in that business in 2017. It also cut its 2015 earnings forecast.
“We cannot sustain these losses,” CEO Stephen Hemsley said Thursday. “We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.”
The announcements come a few weeks after several smaller, nonprofit insurance cooperatives said they would stop selling coverage on the state-based exchanges.
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. Until that happens, the exchanges won’t be a viable, long-term market for these companies, said Morningstar analyst Vishnu Lekraj.
“The market still needs to mature, he said. “That’s the lesson here.”
Luke Clarke, a spokesman for Colorado’s state-run exchange, Connect for Health, said the loss of any insurance company would be a cause for concern but Colorado has eight insurance companies on its exchange, including UnitedHealth, a competitive number.
“Choice is part of our mission,” he said. “We want as many carriers as possible.”
UnitedHealth currently offers 14 plans on the Colorado exchange, through itself and an affiliated company, though not all are available in every county, Clarke said. The plans range from catastrophic — the barest coverage — to bronze, silver, gold and platinum levels.
Clarke said the exchange is not permitted to disclose how many Colorado customers have signed up with UnitedHealth or where it ranks among health insurers in the state.
A UnitedHealth spokesman said the company doesn’t break out numbers by state but has about 550,000 members across all the exchange markets that it serves.
That’s a small slice of the insurer’s total enrollment, which exceeds 46 million, and Hemsley emphasized Thursday that the company’s overall business remains strong.
The Colorado exchange has experienced other difficulties. Last month, it from the marketplace because it did not meet state capital-reserve requirements.
Enrollment for 2016 coverage started Nov. 1, and more than 1 million people nationwide signed up or renewed coverage for 2016 in the first two weeks of open enrollment, according to the Obama administration.
UnitedHealth rivals Aetna and Anthem — which reaffirmed its 2015 earnings forecast last week — said last month that they still see potential in the business. Aetna CEO Mark Bertolini told analysts it was “way too early to call it quits.”
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.
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.
Since then, the insurer says financial hits from that business have come into clearer focus. The insurer has been hurt in particular by customers who signed up for coverage outside the open enrollment window and use more health care in general than those who bought coverage during open enrollment.
UnitedHealth will book losses of $275 million in the fourth quarter from its public insurance exchange business and expects a loss of $200 million to $225 million in 2016.
Its exchange losses have been deep enough to force the company to cut a forecast it had already raised twice this year. UnitedHealth now expects 2015 earnings of about $6 per share, down from its previous forecast for $6.25 to $6.35 per share.
Analysts expect, on average, earnings of $6.31 per share, according to FactSet.
Denver Post staff writer David Olinger contributed to this report.
