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Nation's biggest health insurer threatens to drop Obamacare

UnitedHealth announced Thursday that it will cutback its advertisements encouraging Obamacare enrollment and possibly abandon the program completely by 2017.

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    Maria Alvarado holds her 10-month-old son Kevin Rios as she waits in line at a health insurance enrollment event in Cudahy, Calif., March 27, 2014. As of March 2014, more than 6 million people had signed up for private insurance plans under President Obama's signature healthcare law known as Obamacare, reflecting a surge in enrollments days before the March 31 deadline, the White House said on Thursday.
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The nation’s largest health insurer UnitedHealth said Thursday it is having serious doubts about participating in Obamacare.

The company cut back projected 2016 earnings Thursday, reporting potential losses of $275 million, or 26 cents per share, due to plans sold through Affordable Care Act (ACA) exchanges.

In response to these losses, UnitedHeath announced it will reduce its marketing efforts for these exchange plans when the current sign-up period ends and reconsider “to what extent it can continue to serve the public exchange markets in 2017,” suggesting potential withdraw from ACA altogether. 

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“We cannot sustain these losses,” CEO Stephen Hemsley said during a conference call with investors Thursday, the Associated Press reported. “We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.”

UnitedHealth said they will announce a formal decision during the first half of 2016, but the current data doesn’t look very promising. 

“In recent weeks, growth expectations for individual exchange participation have tempered industrywide, 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,” said Mr. Hemsley.

This announcement from UnitedHealth is unexpected. The largest US insurer, serving about 70 million individuals, has increased its ACA involvement over the past two years. Originally starting with four exchanges, the company increased to 24 exchanges this year alone. Just last month the company seemed enthusiastic about its future with ACA when speaking with investors.

“I think we’ll see strikingly better performance on the insurance exchange business” in 2016, UnitedHealth CFO David Wichmann said last month. The company also suggested that it would expand into 11 more exchanges next year. 

The Minnesota-based insurer serves about 500,000 of the overall 10 million individuals who have signed up for healthcare coverage through Obamacare, or about five percent of the market. So although UnitedHealth’s withdraw would impact a number of Americans, its participation is far less than Anthem, Aetna, or Humana Inc.

John Gorman, an insurance consultant, suggests UnitedHealth is acting quickly and irrationally. Mr. Gorman says the company should have waited at least four years to give the marketplaces time to stabilize. 

“It struck me as having kind of a glass chin for this business,” Gorman told Politico. “You have to be willing to take the rollercoaster ride.”

Aetna Inc. CEO Mark Bertolini agrees with Gorman, telling analysts last month that his company still sees exchanges as an opportunity and it was “way to early to call it quits,” according to AP.

Analysts also say UnitedHealth’s announcement could impact 2016 elections, aiding Republican efforts to undermine the healthcare law.

“We call upon Senate Republicans to use reconciliation to send a full repeal of Obamacare to the president’s desk,” FreedomWorks CEO Adam Brandon said in a statement. “Now is not the time for timid tinkering.”

This report contains material from Reuters and the Associated Press.

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