UnitedHealth CEO: Obamacare Business Not Improving After Company Loses $425 Million

<> on December 15, 2014 in Miami, Florida.

UnitedHealth Group chief executive Stephen Hemsley tells investors he rushed the huge insurance company into the Obamacare government-run exchanges too soon, costing the company at least $425 million.

“So, who is to blame? You’re looking at him. It was, for us, a bad decision … In retrospect, we should have stayed out longer,” he said at the New York meeting.

“No, we cannot sustain these losses,” Hemsley said in response to a question from an investment analyst. “We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself… we saw no indication of anything actually improving.”

“It will take more than a season or two for this market to develop,” Hemsley said, adding that the company will decide whether to continue selling exchange policies on a market-by-market basis next year.

UnitedHealth did not enter the exchanges in 2014-15 but waited until 2015-2016, when it offered coverage on 24 of the 34 federal exchanges, according to The Wall Street Journal.

But in mid-November, the company announced a $425 million downgrade to its earnings forecast for 2015, largely due to losses on Affordable Care Act exchanges. UnitedHealth, the largest U.S. insurer, stopped advertising its ACA coverage and terminated commissions offered to insurance brokers who enrolled customers in the exchanges.

Typical problems attributed to ACA have plagued UnitedHealth:

  • Too few young middle-income customers are buying the expensive coverage from the exchanges to cross-subsidize the many poorer, older, sicker buyers;
  • Too many poor people are buying coverage just before large medical expenses occur, and then are dropping out once the health problem is paid for by the companies.

According to Morgan Stanley, UnitedHealth’s average premium increase for 2016 was 9 percent.

Forbes reported in November, “UnitedHealth’s rivals have had to raise rates by double-digit percentages in certain markets and reduce customer access to plans, instead offering narrow networks of doctors and hospitals.”