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If you signed up for a UnitedHealth Group plan on an Obamacare exchange for 2016, don't count on renewing your coverage next year if you live in Connecticut, Michigan, or dozens of other states. The nation's largest insurer said it is pulling out of the individual exchange business in 2017, in all but a few markets.
"Next year, we will remain in only a handful of states," UnitedHeath CEO Stephen Hemsley said on the company's earnings conference call Monday. "We continue to remain an advocate for more stable and sustainable approaches to serving this market and those who rely on it for care."
United first sounded the alarm about its Affordable Care Act participation five months ago, projecting more than $1 billion in ACA losses for 2015-2016. Part of the problem was that its Obamacare members had more health issues and required more medical services and prescriptions than members in its other insurance units. United officials say that trend hasn't changed.
Former insurance executive Robert Laszewski says UnitedHealth is only making money in about nine states, out of nearly three dozen where it participates. It's no surprise that they're pulling back sharply, yet maintaining a toehold in the market.
"Getting out of the exchanges almost means you're getting out of the individual health insurance business," said insurance consultant Robert Laszewski, president of Health Policy and Strategy Associates. "This is ultimately going to be a 20 to 30 million person market, when it ultimately gets fixed."
Executives on the United earnings conference call did not offer market-specific details about their Obamacare plans for next year. They have confirmed that they'll pull out Arkansas, Georgia and Michigan. Officials in Connecticut say the insurer will also exit their state exchange in 2017.
"United Healthcare has a Connecticut footprint, they have been a good partner and we are pleased that they were among the first to join the exchange," said Access Health CT CEO Jim Wadleigh in a statement, adding that the state will provide United clients with guidance in the Fall.
"The team at Access Health CT is dedicated to making this transition as smooth as possible as their customers re-enter the marketplace in 2017," Wadleigh said.
Leerink analyst Ana Gupte outlined some other possible exits in a note to clients, highlighting five states which accounted for nearly half of United's exchange losses in 2015: Florida, North Carolina, New York, Alabama and Louisiana.
The big question is how it will impact consumers. A Kaiser family foundation analysis found that United's sharp pullback from the exchanges next year, could boost rates an additional 1 percent. Still the insurer's departure would still leave the majority in Obamacare exchanges — 88 percent — with more than one option. Roughly 11 percent of market would have just one insurer, compared to 2 percent now.
Despite the high costs from Obamacare plans, United's first quarter results topped estimates, with profits of $1.9 billion, or $1.81 per share, and revenues of $44.5 billion. Growth was driven by its Optum consulting and pharmacy benefits business.
The insurer also boosted its 2016 guidance by 15 cents per share to a range of $7.75 to $7.95.
UnitedHealth shares closed just off a new historic high of $131.30. The insurer's outlook for tame medical cost trends outside of exchange plans also gave a lift to shares of its rivals, Anthem and Aetna, which report results next week.