UnitedHealth will jump into 11 more public insurance exchanges next year, as the nation's biggest health insurer grows more comfortable with one of the health care overhaul's main ways of expanding coverage to millions of people.
The once-reluctant exchange participant now draws 550,000 customers from that market and predicts that business will improve next year, helped by double-digit price hikes.
"We continue to expect exchanges to develop and mature over time into a strong, viable growth market for us," Chief Financial Officer David Wichmann told analysts during a Thursday morning conference call to discuss the Minnesota-based insurer's third-quarter earnings performance.
State-based health insurance exchanges opened a couple years ago as a way for customers to buy individual health insurance, many with help from income-based tax credits. The overhaul also expands coverage through the state- and federally-funded Medicaid program, which mainly serves the needy and those who are disabled.
The public exchanges offered a potential growth boom to insurers, but they came with a lot of questions because companies had little sense for the health risks these new customers would represent.
UnitedHealth participated in only 4 exchanges in the first year and then expand to 24 for 2015. That gave it a bigger presence than key rivals Aetna Inc., with 17 exchanges, and the Blue Cross-Blue Shield insurer Anthem Inc., which participated in 14.
Now, UnitedHealth Group Inc. will add nearly a dozen more, although these customers still represent a small slice of total enrollment of more than 46 million people.
The company doesn't detail how much money it makes off the exchange business, but Wichmann did tell analysts that he expects UnitedHealth's performance to be "strikingly better" in 2016.
UnitedHealth executives said they saw industry data in the first half of this year that pointed to a higher-than-expected use of medical services, and they used that to set prices for 2016.
"We put in strong price increases," said Daniel Schumacher, chief financial officer for the company's UnitedHealthcare segment. "Average increases across the country are in the double digits, and we also took steps to eliminate some products and reposition other products."
Insurers have been saying since spring that they expect to hike premiums, or the price of coverage, for exchange coverage well beyond 10 percent for 2016, due to higher-than-expected costs from prescription drugs and other expenses.
Some insurers also are still adjusting their prices as they learn more about their patients and what the competitors charges. Insurers normally want a couple years of claims data before they set prices on a patient population, and they haven't had that with the exchange business.
Health insurance price hikes, which insurers largely blame on the soaring cost of care, have been the subject of growing scrutiny for several years. Some state regulators can reject them, while others try to pressure companies into revising their plans.
Information on next year's premiums is starting to trickle out in many states. Customers can start signing up for 2016 coverage on Nov. 1.