Industry giant UnitedHealth warned it may quit selling Obamacare coverage across the country, raising questions about an expansion in California.
The nation’s largest health insurer cut its earnings forecast Thursday, citing slower growth on public exchanges under the Affordable Care Act and higher-than-expected claims for those individual policies.
The company said it was pulling back on marketing of health-law coverage just a few weeks after open enrollment began Nov. 1. UnitedHealth said it will decide in the first half of next year “to what extent it can continue to serve the public exchange markets in 2017.”
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“We cannot sustain these losses,” UnitedHealth Chief Executive Stephen Hemsley said Thursday. “We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.”
This latest move comes amid slower enrollment growth nationwide as many of the uninsured balk at buying high-deductible health plans, even with federal subsidies available. It’s crucial for insurers to sign up enough healthy people to help pay for sicker policyholders who eagerly seek out coverage.
“The policies are still too expensive and the deductibles and co-pays are too high for other than the poorest,” said Robert Laszewski, a healthcare consultant in Virginia who has closely tracked the overhaul.
He noted that much of the reduction in the ranks of the uninsured has come from expanding Medicaid, the government health program for the poor. “Obamacare has been a huge failure among the working class and middle class,” Laszewski said.
Analysts said government-run exchanges can continue to function without participation from UnitedHealth, but stagnant enrollment overall is a concern industrywide.
“Public exchange enrollment is disappointing after three weeks and points to a likely underwhelming exchange enrollment in 2016,” said Ana Gupte, a healthcare analyst at Leerink Partners. “That’s likely to place pressure on both health plans and providers.”
Federal officials said the number of health plans offering exchange policies has increased since the 2014 launch, and it expects the individual market will stabilize as adjustments are made.
“The health insurance marketplace is entering its third year and continues to grow, giving millions of Americans access to quality affordable insurance,” said Ben Wakana, a spokesman for the U.S. Department of Health and Human Services. “Today's statement by one issuer is not indicative of the marketplace's strength and viability.”
The Obama administration expects about 10 million people to be covered through federal and state-run insurance markets by the end of 2016. Federal officials estimate that about 10.5 million uninsured Americans are eligible to sign up for coverage through the marketplaces, but have not enrolled.
UnitedHealth just joined the Covered California exchange this month after sitting out the first two years. The company sought permission in January to sell statewide, but California officials limited the insurer to several smaller markets for 2016.
Those areas are predominantly rural counties in Northern California, but they also include Santa Barbara, Ventura and San Luis Obispo counties.
Covered California imposed that restriction because UnitedHealth left the state’s individual market at the end of 2013 and spurned the launch of the exchange.
Many consumer groups welcomed UnitedHealth’s arrival in Covered California in order to give people more choices and inject more competition in the individual market. The top four insurers in the exchange, led by Anthem Inc. and Blue Shield of California, control about 94% of Covered California enrollment.
A spokesman for UnitedHealth said no decision has been made on its future participation in Covered California. “We will make an assessment of 2017 markets in the first quarter of 2016,” spokesman Tyler Mason said.
The announcement Thursday marked a sudden shift for UnitedHealth, which had sounded bullish about the health law in recent months. The company initially sold coverage on only four government-run exchanges before expanding to 24 this year.
UnitedHealth doesn’t break out the performance of its exchange business, but the insurer said it was cutting its forecast in part to account for $ 275 million in losses it expects next year. The company expects 2015 earnings of about $ 6 per share, down from its previous forecast for $ 6.25 to $ 6.35 per share.
Shares of UnitedHealth were down $ 6.50, or 5.5%, to $ 110.75 in trading Thursday.
Covered California has about 1.3 million people enrolled and nearly 90% of them receive federal premium subsidies.
People can qualify for subsidies if they make less than four times the federal poverty level, which is about $ 47,000 annually for a single adult and $ 97,000 for a family of four.
The state exchange fell short of its enrollment goal during the second sign-up period, and it has acknowledged that reaching the remaining uninsured is difficult.
Covered California said this week that 34,000 new enrollees had picked out a health plan since Nov. 1. The state said that’s behind last year’s pace but within its projections.
“Enrollment continues at a healthy pace, with thousands of people signing up for coverage every day,” said Peter Lee, executive director of Covered California.
chad.terhune@latimes.com
Twitter: @chadterhune
Associated Press contributed to this report
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