UnitedHealth, the largest health insurer in the United States, is planning a widespread exit of the Obamacare market due to mounting losses from participating in the program.
UnitedHealth’s CEO said in an investor call Tuesday morning that the Obamacare market has continued to show high risk.
“Next year we will only remain in a handful of states,” CEO Stephen Hemsley said. UnitedHealth lost $425 million last year due to Obamacare.
The insurer, which had plans in 34 states this year according to the Kaiser Family Foundation, had already said it would pull out of Michigan, Georgia and Arkansas next year.
Though United is the most prominent insurer to announce widespread exit from Obamacare, there has been a broader trend of participating insurers struggling to turn a profit in Obamacare’s exchanges. The program has suffered from lower-than-expected enrollment, particularly among younger and healthier customers who are necessary to offset the costs of covering older and sicker enrollees. If insurers start to exit, it will mean less competition, which will drive already rising premiums up even further.
Defenders of Obamacare will note that even though United is the largest insurer in the U.S. in general, it is not one of the largest players within the Obamacare market, as much of its business comes from offering plans through employers.
Still, an analysis released Monday found that if UnitedHealth exits the markets entirely it would cause some premiums to rise by up to $100 and reduce competition in some markets.
UnitedHealth said that its exchange enrollment is about 750,000 people; about half of those are new enrollees. Low enrollment was listed as among the reasons for the exits.
“The early indication on health status [of those enrollees] appears to be a little bit worse,” said Dan Schumacher, UnitedHealth’s chief financial officer.
Other insurers have indicated that they intend to stick with Obamacare.
Anthem, which has a greater Obamacare business than UnitedHealth, has said that enrollment in the marketplaces didn’t meet expectations last year. However, it remains committed to Obamacare with the hopes the market will stabilize and become profitable.
Analysts and experts have said that UnitedHealth has a broader portfolio than Anthem and other major insurers, so exiting Obamacare isn’t as much of a hit for that company in terms of profit.
However, UnitedHealth’s announcement comes amid other competition issues. Twelve of 23 taxpayer-funded consumer-oriented-and-operated plans have shut down due to a lack of federal funding.
The plans were funded by the federal government as part of an effort to create more competition on the exchanges, which is key to driving down premiums.
The administration has said it expects changes and adjustments in the early years of the market, noting that Obamacare has just been in operation since 2014.
“We have full confidence, based on data, that the marketplaces will continue to thrive for years ahead,” said Ben Wakana, a spokesman for the Department of Health and Human Services, in a statement on Monday in response to the Kaiser report on UnitedHealth.
“The number of issuers per state has grown year-over-year. The marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer,” he added.
