UnitedHealthcare mulling withdrawal from Obamacare exchanges

One of the nation's largest insurance companies is seriously considering withdrawing from the Obamacare insurance exchanges due to massive losses, and the small chance that the enrollment numbers will get any better.

The company cited the closing of nearly half the non-profit co-op organizations as a major reason for their hesitation in offering insurance plans beyond 2016.

UnitedHealthcare is bleeding $425 million in losses this year and is considering abandoning the exchantes because "market data has signaled higher risks and more difficulties while our own claims experience has deteriorated," according to a statement from CEO Stephen J. Hemsley.

Wall Street Journal:

In a press release, UnitedHealth CEO Stephen J. Hemsley said:

“In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step. We continue to be pleased with the growth and overall performance of our Company outside of the individual exchange products and look forward to strong, positive and broad based earnings growth across our enterprise in 2016.”

He added in a conference call, according to the Thomson StreetEvents transcript:

“As you are aware, we avoided the introductory year of the public exchange, entering the market in a measured fashion in its second year. We saw it as a market with potential growth, but with acknowledged reservations as to whether that market would have balanced participation, effective controls over participants moving in and out of coverage as health care needs emerge, and whether exchanges would be regulated in ways that prioritize sustainable underwriting to ultimately reflect the true cost of coverage for the population served.

“As 2015 has played out, the exchange represented the key source of increasing pressure on our overall care ratio. In our view, in recent weeks market performance expectations for exchange products have further declined. We have identified higher levels of individuals coming in and out of the exchange system to use medical services; lower expectations for new growth in overall future participation; declining performance in and accelerating failures of the sponsored health cooperatives; and our own emerging claims experience, which is worsening as the year end nears.

“The combination of these factors suggest the overall exchange market profile is more negative than we had planned, with new market enrollment growth developing more slowly. These indicators point to an environment that is declining and likely to continue in that direction into next year, and we see no data pointing toward improvement, which is why we have taken this proactive step….

What is really weighing on UHC is that the money promised by Obamacare to offset losses didn't even come close to being enough. The "risk corridors" developed to take money from insurance companies that were profitable and giving it to companies who had losses are a bust:

Federal authorities said that insurers will at first receive only about 12.6% of the money that they requested from the program, known as risk corridors, for 2014, its first year of operation. Insurers have requested approximately $2.87 billion in payments from the program based on their 2014 results. But the pool available to make those payments is just $362 million, which came from collections from other insurers that did relatively well on their marketplace business.

An official from the Centers for Medicare and Medicaid Services said as more money comes into the program in future years, it will be paid out to backfill the shortfall for the 2014 allotment. But if there is still a shortfall after the program’s third and last year, 2016, she said, “We will explore other sources of funding, subject to the availability of appropriations.”

Too many sick people signing up, declining benefits and soaring costs for plans - the news just keeps getting worse for Obamacare. If UHC ditches the exchanges, you can bet other big companies will do so as well. At that point, you won't need a vote in Congress to kill Obamacare; it will collapse in a muddled heap - the biggest boondoggle in the history of the American government.

The good news is that even if Obamacare collapses, people will probably be able to keep their insurance plans whether they buy them individually or get them through their employer. That's a small comfort to the taxpayer who is left holding the bag.



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