UnitedHealth plans to exit Obamacare exchanges

Reuters News
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Posted: Apr 19, 2016 6:08 AM

By Caroline Humer

(Reuters) - U.S. health insurer UnitedHealth Group Inc on Tuesday said it would largely exit the Obamacare individual insurance market in 2017, citing expectations for mounting losses from the program.

UnitedHealth is the largest U.S. health insurer and one of the biggest sellers of plans on the exchanges, which were created as part of President Barack Obama's national healthcare law. UnitedHealth sells these plans in 34 states this year, up from 25 states last year.

"Next year, we will remain in only a handful of states," UnitedHealth CEO Stephen Hemsley said in prepared remarks as part of the company's first-quarter earnings report.

The company warned investors late last year that it was losing money on the new plans and might exit the market. On Tuesday, the company raised its 2016 expectation for losses on the exchanges by $125 million to $650 million.

UnitedHealth's Hemsley said that the shorter term, higher risk profile of the new members, as well as the smaller than expected enrollment, suggested UnitedHealth could not offer plans on a sustained basis.

For the first quarter, United Health's profit was better-than-expected and UnitedHealth shares rose 1.9 percent to $130.29 in early New York Stock Exchange trading.

Other health insurers including Aetna Inc and Anthem Inc are also large players on the exchanges. In recent months they said they will continue to sell exchange plans.

The company has 795,000 customers from the exchanges, more than half of them new to UnitedHealth, it said. It expects about 650,000 members by year end.

The government said in February that more than 12 million people had signed up for Obamacare-related insurance through HealthCare.gov or a state-based exchange as of Jan. 31. Previous government expectations had been for more than 20 million people.

RAISES 2016 PROFIT OUTLOOK

UnitedHealth raised its expectations for 2016 profit, in part because of a more favorable tax rate that also helped it beat Wall Street expectations for the first quarter.

Lower sales and administrative costs and a decline in amortization of intangible assets also helped its first quarter results. On an adjusted basis the health insurer earned $1.81 per share, compared with Wall Street analyst expectations for earnings of $1.72 per share, according to ThomsonReuters I/B/E/S.

Net profit rose to $1.61 billion, or $1.67 per share, from $1.41 billion or $1.46 per share, a year earlier.

The company now expects 2016 adjusted net earnings of $7.75-$7.95 per share, up 15 cents per share from its previous estimate.

(Reporting by Caroline Humer in New York and Amrutha Penumudi in Bengaluru; Editing by Shounak Dasgupta, Chizu Nomiyama and W Simon)