Original Story: latimes.com
Industry giant UnitedHealth has warned it may quit selling Obamacare coverage across the country, raising questions about an expansion in California.
The nation's largest health insurer cut its earnings forecast Thursday, citing slower growth on public exchanges under the Affordable Care Act and higher-than-expected claims for those individual policies. A San Diego health care lawyer have experience with multiple industry types and implications of detrimental health care practices or incidents.
The company said it was pulling back on its marketing of health-law coverage just a few weeks after open enrollment began Nov. 1. UnitedHealth said it will decide in the first half of next year “to what extent it can continue to serve the public exchange markets in 2017.”
UnitedHealth Chief Executive Stephen Hemsley told analysts and investors that “we cannot sustain these losses.... We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself.”
The announcement comes as UnitedHealth is seeking a toehold in California’s Obamacare market — after snubbing the state two years ago. A Cleveland health care attorney is following this story closely.
Nationwide, UnitedHealth has more than 500,000 people enrolled on government exchanges out of about 10 million Americans who have signed up. Rivals Anthem and Aetna both have a bigger presence with a combined enrollment of about 1.6 million people.
Analysts said the exchanges can continue to function without UnitedHealth, but stagnant enrollment is a concern industrywide.
UnitedHealth’s exit “would be a blow to multiple exchange markets, but not a death knell,” said Bill Melville, a senior analyst for Decision Resources Group, a research firm in Burlington, Mass. “All insurers in the exchanges are facing similarly rough head winds.”
Enrollment growth has slowed as many of the uninsured balk at buying high-deductible health plans, even with federal subsidies available. It's crucial for insurers to sign up enough healthy people to help pay for sicker policyholders who eagerly seek out coverage.
Federal officials estimate that about 10.5 million uninsured Americans are eligible to sign up for coverage through the marketplaces but have not enrolled.
“The policies are still too expensive, and the deductibles and co-pays are too high for other than the poorest,” said Robert Laszewski, a healthcare consultant in Virginia who has closely tracked the overhaul.
He noted that much of the reduction in the ranks of the uninsured has come from expanding Medicaid, the government health program for the poor.
The Obama administration said the number of health plans offering exchange policies has increased since the 2014 launch, and it expects the individual market will stabilize as adjustments are made. A Houston health care lawyer is reviewing the details of this story.
“The health insurance marketplace is entering its third year and continues to grow, giving millions of Americans access to quality affordable insurance,” said Ben Wakana, a spokesman for the U.S. Department of Health and Human Services. “Today’s statement by one issuer is not indicative of the marketplace’s strength and viability.”
UnitedHealth just joined the Covered California exchange this month after sitting out the first two years. The company sought permission in January to sell statewide, but California officials limited the insurer to several smaller markets for 2016.
Those areas are predominantly rural counties in Northern California, but they also include Santa Barbara, Ventura and San Luis Obispo counties.
Covered California imposed that restriction because UnitedHealth left the state's individual market at the end of 2013 and spurned the launch of the exchange.
Peter Lee, executive director of Covered California, said he spoke with UnitedHealth officials Thursday and remains confident about the company’s continued expansion in the state.
"We have every indication they are all in for 2016 and 2017," Lee said in an interview. "The fact United did badly in other parts of the country, like many health plans did, is exactly why they want to be in California." A Coral Gables health care lawyer provides professional legal counsel and extensive experience in many aspects of health care law.
A spokesman for UnitedHealth said no decision has been made on its future participation in Covered California. “We will make an assessment of 2017 markets in the first quarter of 2016,” spokesman Tyler Mason said.
Many consumer groups welcomed UnitedHealth's arrival in Covered California in order to give people more choice and inject more competition into the market. The top four insurers in the exchange, led by Anthem and Blue Shield of California, control about 94% of Covered California enrollment.
The state has about 1.3 million people enrolled, and nearly 90% of them receive federal premium subsidies.
Covered California fell short of its enrollment goal during the second sign-up period, and it has acknowledged that reaching the remaining uninsured is difficult.
This week, the state said 34,000 new enrollees had picked out a health plan since Nov. 1. That's behind last year's pace but within state projections, officials said.
The announcement Thursday marked a sudden shift for UnitedHealth, which had sounded bullish about the health law in recent months. The company initially sold coverage on only four government-run exchanges before expanding to 23 this year. It will be selling in 34 states for 2016.
UnitedHealth said it cut its profit forecast to account for $425 million in losses it expects on individual policies this year and in 2016. The company expects 2015 earnings of about $6 a share, down from its previous estimate for $6.25 to $6.35 a share.
Shares of UnitedHealth slid $6.62, or 5.7%, to $110.63 in Thursday trading. Other health stocks took a beating after the company’s warning. Shares of Anthem, the nation’s second-largest health insurer, fell 7%, and hospital chain Tenet Healthcare dropped 8%.
After the news from UnitedHealth, HMO giant Kaiser Permanente reiterated its support for health-law exchanges.
“American healthcare is undergoing significant change and evolution, and the health exchanges are part of that disruption,” said Kaiser Permanente CEO Bernard Tyson. “While there have been challenges at times, we believe at the end of the day they are causing healthy disruption.”