Questions and answers about UnitedHealth's exchange troubles

AP News
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Posted: Nov 19, 2015 4:43 PM

UnitedHealth Group said Thursday that it is pulling back from its push into the Affordable Care Act's public insurance exchanges only a month after touting future growth prospects for that business.

The insurer said it was cutting back on its marketing for 2016 coverage it sells in the exchanges, which collectively are a key element behind the ACA's push to cover uninsured people. It also will decide in the first half of 2016 whether it will participate in the exchanges for 2017. Here are some key points behind the announcement:

WHY IS UNITEDHEALTH DOING THIS?

It's losing money.

UnitedHealth expects to book an operating loss of slightly more than $700 million this year, largely from its exchange business. That includes advanced recognition of $275 million in losses it anticipates from next year, when it also expects to lose an additional $200 million to $225 million that it cannot record in advanced recognition.

DOES THIS AFFECT THE COMPANY'S FORECAST

UnitedHealth cut its outlook for 2015. It now expects earnings of about $6 per share. That's down from its previous forecast for $6.25 to $6.35 per share.

CEO Stephen Hemsley told analysts that the company would have earned more than $6.40 per share this year if it had done no business on the exchanges.

WHY NOT QUIT NOW?

Open enrollment for 2016 has already started, and the plans are being sold, so it's too late to quit for next year's coverage. But it's not too late for 2017.

The insurer said it will determine in the first half of next year whether it will continue to participate in the exchanges in 2017.

That gives it a few more months to see whether the business improves and if the government does anything to help improve life for insurers on the exchanges.

IS THIS A BIG CHUNK OF BUSINESS?

The insurer covers about 500,000 people. That's a small slice of its total enrollment, which exceeds 46 million counting international business.

UnitedHealth Group Inc. sold coverage on only four exchanges for 2014. It then expanded to 24 exchanges for this year and is adding 11 more for 2016.

The insurer said as recently as last month that it expects the exchanges to mature into a viable growth market.

WHY IS IT STRUGGLING?

The insurer has been hurt in particular by customers who signed up for coverage outside the open enrollment window and use more health care in general than those who bought coverage during open enrollment.

Insurers expected challenges as they built this business over the past few years. They have been struggling, in particular, to attract enough healthy customers to their coverage to balance sicker patients who use a lot of health care.

WHO ELSE IS HURTING?

Several smaller, nonprofit insurance cooperatives said recently that they would stop selling coverage on the state-based exchanges.

Aetna Inc. said last month that its exchange enrollment fell 11 percent in the third quarter, but company leaders also said the exchanges remain a good market.