Losses lead UnitedHealth to rethink role in ACA exchanges

Insurer readjusts 2015 net earnings projections, takes less optimistic view of individual market
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UnitedHealth Group has revised its earnings expectations for 2015 because of the "continuing deterioration" of how its Affordable Care Act marketplace products are performing, and the insurer is re-evaluating its participation in the individual exchanges.

The move comes after UnitedHealth, which at first took a cautious approach to entering the ACA individual market, announced in its third-quarter earnings report that it will expand to 11 new public exchanges in 2016. With that mid-October announcement, CFO Dave Wichmann called exchanges "a strong viable growth market for us."

But now that the third open enrollment period has commenced, UnitedHealth seems to be taking a less optimistic view. "In recent weeks, growth expectations for individual exchange participation have tempered industry-wide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step," Stephen J. Hemsley said in the most recent announcement.

That includes revising the company's 2015 net earnings to $6 per share--down from $6.25 to $6.35 per share--to account for an expected fourth-quarter earnings reduction of $425 million, or 26 cents per share. That move was driven by projected losses on individual exchange-compliant products for 2015 and 2016, according to the insurer.

UnitedHealth has pulled back on its individual exchange product marketing efforts for 2016, and says it will decide in the first half of next year to what extent it will continue to participate in public exchange markets in 2017.

Other major insurers' recent earnings reports also reflected the challenges of operating on the exchanges, with Humana discontinuing some ACA exchange plans as it "continues to evaluate its participation" in the market for 2017. And Anthem CEO Joseph Swedish noted in the insurer's earnings report that its "individual business continues to lag as a result of lower than expected enrollment."

Insurers are offering fewer preferred provider organization plans on the exchanges, recent research has found, and premiums for silver "benchmark" plans are set to rise by an average of 7.5 percent. Yet even as payers readjust their strategies, Aetna CEO Mark Bertolini said in his company's recent earnings report that it's "way too early" to call it quits on the ACA exchanges.

To learn more:
- here's the announcement

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