UnitedHealth Group Inc. (NYSE:UNH) is responding to heavy losses on 2015 health insurance exchange plan coverage, and a sense of a lack of momentum in the public exchange program, by taking immediate steps to keep its 2016 exchange plan enrollment as low as possible, the company said today.
Stephen Hemsley, UnitedHealth’s chief executive officer, said the company is suspending marketing in most Patient Protection and Affordable Care Act (PPACA) exchange markets and reducing agent and broker commissions in most markets.
Earlier in the year, the company announced it would eliminate some individual health insurance products in 2016 and increase the cost of the remaining products. ”The actions should temper any growth in 2016,” Hemsley said during a conference call with securities analysts. UnitedHealth organized the call to discuss a move to reduce its earnings forecasts for the fourth quarter of 2015 and for 2016 to reflect anticipated individual health business losses.
For 2017, “we are evaluating the viability of the insurance exchange product category for us, Hemsley said.
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The company will look at public exchanges on a market-by-market basis and will decide if it will participate in any of them, and where, by mid-2016, Hemsley said.
“Participation in exchanges is not essential to our overall benefits offerings,” Hemsley said. He noted that other UnitedHealth operations, including its Medicare and Medicaid plan operations, are doing well.
Hemsley said UnitedHealth will lose $440 million on individual health in 2015 and is reducing its earnings forecast by $425 million, to reflect $75 million in spending on a new Medicaid plan and $275 million in projected 2016 PPACA-compliant individual health losses it expects to record in 2016. The company also expects to record another $200 million to $225 million in 2016 losses in 2016.
The individual health operating losses and charges may cut UnitedHealth’s 2015 earnings 26 cents per share, to $6 per share, Hemsley said.
UnitedHealth’s rush to highlight a retreat from the exchange program wo weeks after the start of the open enrollment period for 2016 raises new questions about the viability of the PPACA individual health market regulatory system.
Assurant Inc. (NYSE:AIZ) began to pull out of the 2016 exchange market in April and is in the process of closing its health insurance business. Humana Inc. (NYSE:HUM) announced earlier this month that it will cut back on individual health sales in 2016 and is thinking about the possibility of getting out of the individual health market in 2017.
Anthem Inc. (NYSE:ANTM), Aetna Inc. (NYSE:AET) and Humana Inc. (NYSE:HUM) continue to be major exchange plan providers, but their executives have sounded less enthusiastic about the exchange program.
Managers of some of the struggling nonprofit, member-owned Consumer Operated and Oriented Plan (CO-OP) carriers created with PPACA startup loans have suggested that executives at the big carriers were rooting for their failure. But Hemsley said UnitedHealth sees the CO-OPs’ problems as a sign of problems with the entire PPACA exchange system, not a reason to celebrate.
UnitedHealth mostly stayed outside of the PPACA exchange market in 2014. It began selling exchange coverage in many states for the 2015 coverage year, and it’s now selling 2016 exchange coverage in 34 markets.