The step which would be huge drawback for US President Barack Obama’s signature domestic policy achievement.
Chief Executive Stephen Hemsley, UnitedHealth Group Inc informed media,” We would decide in early 2016 whether to sell on the marketplaces the following year. We cannot sustain these losses and can’t really subsidise a marketplace that doesn’t appear at the moment to be sustaining itself.”
According to media reports, UnitedHealth Group Inc. has scaled back marketing efforts for plans sold to individuals this year and may quit the business entirely in 2017. It’s an abrupt shift from October, when the health insurer said it was planning to sell coverage through the Affordable Care Act (ACA) in 11 more states next year, bringing its total to 34. The company also cut its 2015 earnings forecast.
While millions of Americans have gained coverage under Obamacare since new government-run marketplaces for the plans opened in late 2013, in UnitedHealth’s case they haven’t been the most profitable. Customers the company has added have tended to use more medical care. UnitedHealth also stated that some people are signing up for coverage, getting care and then dropping their policies.
UnitedHealth said it expects as much as $500 million in losses on the Obamacare plans in 2016. The insurer will record $275 million of the costs in the fourth quarter.Added that it’s booking US $350 million in losses tied to the 2015 performance of its ACA plans.
The company’s shares fell 5.6 per cent to US $110.63 at the close in New York. 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.
Insurance markets rely on premiums paid by healthy people to subsidize the medical costs of the sick. If an insurer sets premiums that are too low or attracts customers that are too sick, it can suffer losses. That can be a particular risk in new markets that an insurer may not be as familiar with.
While UnitedHealth has been slower than some of its rivals to sell Obamacare policies.
Meanwhile the Obama administration pointed out that many people are signing up for Affordable Care Act policies. About 1.1 million people have signed up for coverage in the first two weeks of enrollment, which began on November 1.
UnitedHealth covers fewer than 550,000 people on the Obamacare exchanges. About 9.9 million people had insurance through the US and state-run insurance markets as of June 30.