The nation’s largest health insurer, UnitedHealth Group, said Thursday that it is retreating from efforts to attract customers for the coming year in insurance exchanges created under the Affordable Care Act — and may withdraw from the marketplaces altogether in 2017.
UnitedHealth executives attributed the abrupt change of course to what they called “higher risks and more difficulties” in selling coverage through the exchanges in a way that is profitable. The company is the first major insurer to say it might leave the exchanges, raising questions about the stability of the marketplaces that now provide a path to insurance for 10 million Americans.
When the marketplaces first opened two years ago, UnitedHealth was slower than other large insurers, such as Aetna, to join them, but it has been expanding its role. For 2016, United moved into 11 additional markets, bringing its total to 34. Its ACA health plans cover 550,000 people.
If UnitedHealth were to exit the ACA marketplaces in a year , the immediate impact would be too small to topple the exchanges, according to several analysts. They said the announcement may be more important for what it implies about the ability of even large, well-established insurers to thrive in the marketplaces.
“They’re the largest carrier. They’re very good at looking at their own data,” said Katherine Hempstead, who directs the Robert Wood Johnson Foundation’s work on health insurance. “If they can’t make this work, that means this is a really tough environment.”
Federal health officials swiftly sought to counteract any impression that the exchanges are faltering or lack sufficient health plans to generate price competition and provide consumers enough choices. “Today’s statement by one issuer is not indicative of the marketplace’s strength and viability,” said Department of Health and Human Services spokesman Ben Wakana.
“The reality is we continue to see more people signing up for health insurance and more issuers entering the marketplaces,” Wakana said. He pointed out that, in the three dozen states relying on the federal exchange, an average of five insurers are offering ACA health plans in each county.
The announcement by UnitedHealth comes nearly three weeks after the enrollment season opened for Americans to buy health plans through the exchanges, which are designed to offer coverage to people who cannot get affordable health benefits through an employer.
Larry Levitt, a senior vice president at the Kaiser Family Foundation, said UnitedHealth’s concerns may, in part, reflect doubts that it can attract many more customers, particularly healthy people with low medical expenses who help make the business profitable. And he suggested that the Obama administration’s modest enrollment forecast may have spooked insurers.
Last month, HHS officials predicted that 10 million people will have ACA coverage by the end of 2016. That would be the same enrollment as early this summer and only slightly more than 9.1 million officials expect by the end of this year.
Other insurers have hinted that they are struggling in the marketplaces. Blue Cross Blue Shield of New Mexico announced in August that it lost $19.2 million last year in coverage offered to 35,000 people on plans sold on and off of the exchange and would be pulling out of the state’s health insurance exchange.
In Thursday’s announcement, UnitedHealth said the move reflected a “continuing deterioration” in the financial climate for insurers on the exchanges, and it lowered its earnings forecast by $425 million for the fourth quarter. The company’s statement said that it is “evaluating the viability of the insurance exchange product segment” and will decide by the middle of next year whether to remain for 2017.
UnitedHealth cast its decision as a reflection of the uncertain financial outlook surrounding the exchanges. Financial problems have led more than half of co-op insurers — a new type of nonprofit health plan — to drop out of exchanges for the coming year, some voluntarily and some under orders by regulators.
Marilyn Tavenner, chief executive of America’s Health Insurance Plans, the industry’s main trade group, reiterated insurers’ concerns that the government is paying participants in the marketplaces a small fraction of the money they expected this year to help balance the cost of covering patients who are healthy and sick.
“We’ve been very clear with the administration about the serious challenges facing consumers and health plans in this exchange market,” Tavenner said in a statement. “When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result.”