Monday, November 23, 2015

United Healthcare losing money on Obamacare.

United Healthcare is preparing to throw in the towel on the Affordable Care Act as it is hemorrhaging money on the exchanges.  $700 million in the red is not exactly chump change, even in the Fortune 500.  The Wall Street Journal reported Friday: 

The biggest U.S. health insurer said it has suffered major losses on policies sold on the Affordable Care Act’s exchanges and will consider withdrawing from them, adding to worries about the future of the marketplaces at the heart of the Obama administration’s signature health law.

The disclosure by UnitedHealth Group Inc., which had just last month sounded optimistic notes about the segment’s prospects, is the latest sign that many insurers are finding the new business unprofitable, despite an influx of customers that has helped swell revenues.

The industry’s woes, and broad rate increases aimed at stanching the red ink, are putting pressure on the Obama administration to tweak aspects of the law; the issues also risk pulling the ACA back into the political spotlight...

UnitedHealth Group Chief Executive Stephen J. Hemsley said the company isn’t willing to continue its losses into 2017. UnitedHealth has already locked in its exchange offerings for 2016, but it is pulling back on marketing them during the current open-enrollment period to limit membership, which it said last month totaled around 550,000.

The company will make market-by-market determinations in the first half of next year about whether it will continue selling products on the exchanges.

“We can’t sustain these losses,” he said. “We can’t subsidize a market that doesn’t appear at this point to be sustaining itself.”

UnitedHealth made the move amid reduced expectations for growth on the exchanges, the anticipated shutdowns of the majority of the health law’s nonprofit cooperative insurers, and rising costs as its own enrollees continue to increase their rate of health-care use. Mr. Hemsley emphasized problems with consumers “coming in and out of the exchange system to use medical services,” or essentially signing up for health plans when they need to cover health expenses—an issue also highlighted by other insurers.

Exchanges represent a small share of UnitedHealth’s overall membership and revenue. But the company said its operating loss for the exchange business this year will amount to about $700 million, or 45 cents a share, including $275 million that will represent “advance recognition of losses” for 2016. The company said it was projecting an additional $200 million to $225 million in losses for next year that it wouldn’t include in its 2015 results. UnitedHealth said it was revising its 2015 earnings projection to $6 a share, from a previous range of $6.25 to $6.35.

UnitedHealth’s shares fell 5.7% Thursday to $110.63.

UnitedHealth’s announcement comes as other insurers have been sounding alarms about their exchange business, though the big insurer went considerably further than its peers in raising concerns about future viability. Aetna Inc. recently said it expects to lose money on its exchange business this year, but it hopes to improve the result in 2016. Humana Inc. and Cigna Corp. also flagged challenges. Even Anthem Inc., which said its exchange business is profitable, was downbeat in its third-quarter earnings call, warning that enrollment is less than expected.

“All the other big insurers are signaling the same problems,” said Ana Gupte, an analyst with Leerink Partners LLC. The major exception is companies that focus closely on the Medicaid population, such as Molina Healthcare Inc., she said. These companies have lower-cost networks of health-care providers and also draw many low-income consumers whose coverage is largely subsidized.

A Goldman Sachs Group Inc. analysis of state filings for 30 not-for-profit Blue Cross and Blue Shield insurers found that their overall companywide results were “barely break-even” for the first half of 2015. Goldman analysts projected the group would post an aggregate loss for the full year—the first since the late 1980s. The analysis said the health-law exchanges appeared to be a “key driver” for the faltering corporate results.

The impact of the insurance industry’s struggles is already clear in the products offered in the exchange’s current open-enrollment period. For these plans, which will take effect in 2016, many insurers have raised premiums to cover the medical costs of enrollees, which have run higher than many companies originally projected, fueling this year’s losses. Many insurers have also shifted to offering more limited choices of health-care providers.

During the current open enrollment period, premiums for a type of plan that is closely watched as a signal of consumer costs—the second-lowest-priced plans in the law’s “silver” tier—are increasing 7.5% on average across the roughly three dozen states that rely on the federal marketplace, according to the Obama administration. Some individual increases are far sharper.

Analysts say the danger is that higher rates might discourage enrollment, particularly by the younger, healthier consumers that the marketplaces need to draw in. That is because they are the ones most likely to feel they can go without insurance. Their absence would have the effect of driving premiums even higher in the future, because insurers would need more rate increases to cover the costs of a smaller, sicker pool of enrollees. At its worst, this cycle can feed on itself, creating what the industry calls a “death spiral.”

Already, "the risk pool is clearly skewed toward sick people,” said Chris Rigg, an analyst with Susquehanna Financial Group. He and other analysts said that a fundamental problem was a shortfall in enrollment, and to make the marketplaces work better, policy makers would need to take steps such as making it harder for consumers to sign up for coverage outside the annual open-enrollment window.

The Obama administration has said it aims to have about 10 million people with paid-up coverage on the state and federal health-law exchanges by the end of 2016. But that falls well short of some earlier projections: The nonpartisan Congressional Budget Office earlier this year estimated that at least 20 million people would buy policies under the law for 2016 coverage. Rest of article.


Anonymous said...

Single payer coming to a neighborhood near you.

Anonymous said...

I think single payer would/will be a terrible "solution" but then I have to wonder - could it be that much worse than the direction this is currently trending?

Anonymous said...

Comrade 9:59: Quit yoru whining. The state will take care of you. Our Dear Leader has promised free healthcare for everyone. Free Education, free food, free housing, free condoms, free transportation, free everything. Collectively we will live our lives free of worry. So, join the revolution and embrace change, for it is good.

Anonymous said...

What no one wants to discuss is the way the Obama administration has taken intractable positions on the law and its administration. It is SOP for Obama, who sees himself as part dictator, part rock star, and wholly uncriticizable minority. He says it and, damn the torpedoes, it will be done. When parties come with reasonable objections to parts of his health law (that by all accounts was pulled out of an old Democrat drawer and foisted upon the public through Congressional chicanery), he will hear none of it. He is in charge and you will abide by his decision.

If he had a scintilla of humility and a modicum of a desire to work together, these issues would certainly be mitigated, but this scorched earth attitude is manifesting itself in situations like these.

And here's the dirty little secret: Those evil corporations that are the enemy of every leftist and college student who considers The Daily Show to be an august news source? They're using the guidelines set forth in the ACA to reduce their care to the absolute minimum required, so employees are feeling the sting of no copay, $1000 deductible, no drug plan, etc. for the same cost as before. So all the Dems have managed to do is give corporations an excuse to cut benefits and save money.

Anonymous said...

The insurance cabal wrote the dang law-you'd have to a fool not to see it. So, fu*k em. Let them go broke in their quest for extortion.

Translation : we're not buying what you're selling. I'd rather pay the fine.

Kingfish said...

Don't feel sorry for the insurance companies one damn bit. They were warned and I"m sure their private economists and actuaries warned them as well. Screw 'em. No bailouts for them.

Anonymous said...

Aetna said they were doing fine. This is just posturing by Unitedhealth.

Anonymous said...

While it sounds good to the masses to say 'Even if you get sick, they have to insure you', that is not how insurance works. In Mississippi we used to have an assigned risk pool for companies who were poor risks for workman's comp. insurance (perhaps they still have it). We need something like that. In other words, if you are sick you pay more for insurance. They cannot turn you down, but can charge more. There would be a limit on how much they could charge. Take a small % of premiums from healthy people and add it to the extra amount that sick people would pay so they don't have to pay all of the extra costs. This keeps the costs in line for the health people so they will sign up. The idea that the government can force you to purchase insurance is unconstitutional and John Roberts knows it. I have no idea why he voted for this.

This entire thing was completely backwards. What we need is more completion, more companies selling health insurance, not less. People should buy health insurance like car insurance and not get it at work. We must throw this mess out and start over. The very thing that the liar-in-chief said we must do - lower medical costs, is what Obomacare will never do.

Anonymous said...

I'm waiting for the Kenyan to mandate term life insurance that your loved ones can purchase after you've passed away.

Col. Reb Sez said...

If Obamacare had mandated very basic, limited insurance it might have worked. But like most Democratic programs, they believed a magic wand would make it possible to provide in vitro fertilizations, sex change operations, free-free-free, etc., all on the public dime. All of this is done by charging people who just want basic insurance an arm and a leg. Essentially a young, healthy male who buys insurance is paying five or six times more into the system than he can expect to get out of it, even with the penalty. So of course people aren't signing up. It's a fool's game.

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Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

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