UnitedHealth, one of the nation’s largest insurers, announced Tuesday that they expect to lose nearly a billion dollars on plans sold on the Obamacare health exchanges.
During a conference call Tuesday, the insurer revealed it had lost $475 million on Obamacare plans in 2015. That was $50 million worse than the projected $425 million in losses on Obamacare the company anticipated last year.
In addition, UnitedHealth said it expects to lose another $500 million on Obamacare patients in 2016. That would bring the total losses in the company’s first two years (it sat out 2014) to nearly $1 billion.
The insurer blamed the large losses on two primary problems with Obamacare. First, those signing up for plans tend to be older and sicker than expected. That problem seems to be diminishing as a slightly younger mix of people enroll for 2016, but it’s obviously not enough to lead UnitedHealth to think it will come close to breaking even.
The second problem cited by UnitedHealth is the large number of customers signing up outside the normal open enrollment period under hardship exemptions. Since no one can be turned away, some individuals are waiting to sign up until they become ill, getting treatment and then dropping coverage a few months later. The result is a large bill for services sent to the insurer who has collected very little in the way of premiums.
Politico reports the acting administrator for the Centers for Medicare & Medicaid Services acknowledged the problem last week saying, “There are some [special enrollment periods] that we need to clarify because they’re subject frankly to abuse.”
UnitedHealth warned last November that they expected to lose significant money on the exchanges and might consider getting out entirely in 2017. The company did not make any further announcement about that on Tuesday; however, the company has pared back marketing and stopped broker commissions as a way to limit expansion of the failing sector of its business. It also plans to raise its prices to try to minimize future losses.
Despite the losses on the Obamacare exchanges, UnitedHealth announced strong profits in 2015.