UnitedHealth Group Inc., the biggest U.S. health insurer, said it will drop out of all but a “handful” of state exchanges where it sells individual Obamacare plans, acting on concerns it raised last year that it couldn’t turn a profit from the government program that has brought coverage to millions of people.
Chief Executive Officer Stephen Hemsley said Tuesday that the company “will remain in only a handful of states” next year. The exchange market is proving to be smaller and riskier than UnitedHealth had expected, meaning “we cannot broadly serve it on an effective and sustained basis,” he told investors.
UnitedHealth didn’t name the Obamacare markets that it’s exiting, though regulators have confirmed at least 13 withdrawals from the 34 states where the company sold plans this year. The insurer won’t sell individual ACA plans for 2017 in states including Connecticut, Missouri, Nebraska, North Carolina, Pennsylvania, Tennessee, Texas and Washington, regulators confirmed on Tuesday. In at least some of those states, UnitedHealth also is withdrawing from a related small business market.
“It’s going to take a while for these markets to settle out and stabilize,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. “Some carriers are going to see this as an opportunity and potentially go after business in these areas.”
The company also is withdrawing from Arkansas, Georgia, Louisiana, Michigan and Oklahoma. So far, it’s staying in at least three states: Nevada, New York and Virginia.
Volatile Markets
The Patient Protection and Affordable Care Act, President Barack Obama’s signature domestic policy achievement, is projected to cover about 12 million people this year, according to the Congressional Budget Office, helping many afford private insurance using tax subsidies. It has proven volatile for health insurers selling coverage in the new markets, known as exchanges, with some reporting losses.
Customers in ACA exchanges have turned out to be more costly to insure than expected. That may be because sicker people are choosing to buy coverage, or because people buying plans in Obamacare’s early years had lots of deferred medical needs to treat once they got covered. Insurers also have said some people are buying insurance, using lots of care, and then dropping their coverage mid-year.
ACA Losses
UnitedHealth had about 795,000 ACA customers as of March 31. In November, the company warned it was posting losses on ACA policies, and it said in December that it should have stayed out of the individual exchange market longer.
The exchanges are a small part of the company’s total medical membership of 47.7 million people. Yet the insurer said Tuesday that it expects to lose about $650 million on ACA plans this year.
Hemsley spoke on a conference call after the company’s release of first-quarter results, which topped analysts’ profit estimates, thanks in part to UnitedHealth’s consulting, technology and services unit, Optum. The stock gained 2.1 percent to $130.50 at the New York close.
The effect of UnitedHealth’s decision to leave the ACA markets will vary by state. In North Carolina, a quarter of the state’s consumers will see their choices drop to one for next year, according to an analysis from the Kaiser Family Foundation. Many of the rest will have just two carriers to pick from.
No Statewide Coverage
In Washington state, UnitedHealth was a relatively small player in the individual market, with less than 2 percent of enrollment, according to Pam MacEwan, CEO of the state’s health insurance marketplace. Yet the company’s exit from the small business exchange would leave that market without a carrier that offers coverage across the state, MacEwan said in a memo to board members of the Washington Health Benefit Exchange.
A UnitedHealth unit called Harken Health will continue to sell in Georgia, mainly in the Atlanta area. Harken also offers plans in the Chicago area. Katherine Hempstead, who studies health insurance at the Robert Wood Johnson Foundation, said Harken is a sign that UnitedHealth is still trying to figure out a better approach to the new markets created by the ACA.
“They’re not totally giving up on the individual market,” she said. “The one piece of really good news is that they did not pull the plug on Harken. Maybe what United is really doing is reinventing itself.”