UnitedHealth to drop out of all but a few Obamacare states; plans will not be offered on HSRI next year

(Updated 3:42 and 4:29 p.m.)
NEW YORK – UnitedHealth Group Inc., the biggest U.S. health insurer, said it will drop out of all but a “handful” of state exchanges where it sells individual Obamacare plans, acting on concerns it raised last year that the government program that has brought coverage to millions isn’t profitable enough.
Rhode Island is one of the states that will be affected.

A UnitedHealth Group spokeswoman said they will not offer exchange plans on HealthSource RI in 2017.

HSRI spokeswoman Maria Tocco said United notified the Health Insurance Commissioner on Monday of its intention to exit HealthSource RI’s individual and small group markets in 2017.

Tocco said customers in UHC health plans through HSRI will not be affected this year. However, she said they will need to choose a new plan for 2017. Customers can do this during the regular Open Enrollment period that starts in November of this year for coverage beginning Jan. 1, or when their employer renews. HSRI will work with customers of UHC plans to help them choose a comparable plan for 2017, Tocco said.

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“We value choice and competition, so we’re disappointed by the move. However, HealthSource RI will continue to offer a range of medical plan options from Neighborhood Health Plan of RI and Blue Cross & Blue Shield of RI to Rhode Islanders who purchase coverage on the exchange. UnitedHealthcare has a relatively small percentage of total enrollment, so we do not see this largely impacting our customers. We’re confident we’ll be able to help those customers make a smooth transition in 2017 to find plans that meet their health care needs and budget,” Tocco said.

CEO Stephen Hemsley said Tuesday that the company next year “will remain in only a handful of states.” The exchange market is proving to be smaller and riskier than UnitedHealth had expected, meaning “we cannot broadly serve it on an effective and sustained basis.” The company expects to lose about $650 million on the plans this year.

Hemsley spoke on a conference call as part of the company’s release of first-quarter results, which topped analysts’ profit estimates in part thanks to UnitedHealth’s consulting, technology and services unit, Optum.

The Patient Protection and Affordable Care Act, President Barack Obama’s signature domestic policy achievement, is projected to cover about 12 million people this year, according to the Congressional Budget Office, helping many afford private insurance using tax subsidies. It has proven volatile for health insurers selling coverage in the new markets, known as exchanges, with some reporting losses.

UnitedHealth already plans to withdraw from at least five states for 2017 after selling coverage in 34 states for 2016. The company said in December that it should have stayed out of the individual exchange market longer. UnitedHealth had about 795,000 customers of Obamacare’s exchanges as of March 31, and expects that number to fall to about 650,000 by December.

First-quarter results

Earlier Tuesday, UnitedHealth posted first-quarter profit that beat analysts’ estimates as results from its Optum business helped overcome losses on its Affordable Care Act plans.

Earnings were $1.81 a share, excluding some items, UnitedHealth said in a statement, exceeding the $1.72 average of 24 analysts’ estimates compiled by Bloomberg. Changes to how the company accounts for taxes on stock-based compensation boosted adjusted earnings by 6 cents a share, UnitedHealth said.

“Consistent organic growth, strong operating discipline and solid execution generated a strong quarter with a little upside,” Sheryl Skolnick, an analyst at Mizuho Securities USA, said in a research note. “This is a really strong, solid way to start the year.”

The shares gained 1.8 percent to $130.07 at 9:31 a.m. in New York trading.

Net income rose 14 percent to $1.61 billion, or $1.67 a share, on revenue of $44.5 billion. Optum posted operating profit of $1.1 billion, up from $742 million a year earlier. fueled by the expansion of the pharmacy-benefits business with the acquisition of Catamaran Corp. in July. The company raised its 2016 adjusted earnings forecast to a range of $7.75 to $7.95 a share on annual revenue of $182 billion. Analysts had estimated adjusted earnings of $7.73 on average. The change was driven by taxes and accounting items.
UnitedHealth is the first health insurer to report results for the first three months of 2016. Analysts and investors will scrutinize the report for signs of how the entire health-care industry is faring.

UnitedHealth, based in Minnetonka, Minn., said it spent about 82 cents on medical costs for every premium dollar it took in during the first quarter. The company’s medical membership climbed to 47.7 million people on March 31 from 46.4 million in the last quarter on 2015.

Optum includes units that help doctors and hospitals analyze data and treat and bill patients. It also aids employers with health benefits, runs clinics and has a pharmacy-benefits business.

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1 COMMENT

  1. This is exactly why health insurance companies should be driven out of business. Notice how UnitedHealth stated that they Obamacare profit “isn’t profitable enough.” Take offense UnitedHealth, crap on you and all who wish to profit on healthcare distribution. I fully understand the role of the free market in R&D and providing a guaranteed revenue stream to those who stick their necks out in the name of science and medicine. However, distribution and management of said distribution of healthcare should not be leached upon. Bye-bye UnitedHealth!!!