UnitedHealth Group, the U.S.’s biggest healthcare insurer, is on the fence about whether or not it wants to continue to participate in key part of Obamacare. The retreat comes a mere month after UnitedHealth said it would expand its presence in the program’s online marketplace.
Instead, the insurer is scaling back its marketing efforts to seduce current enrollees into its Affordable Care Act plans and is considering dropping out of the marketplace altogether in 2017.
The reason appears to be pretty straightforward: cost. UnitedHealth (UNH) cut its earnings expectations for the year on Thursday, blaming the drop on the poor performance of the ACA-compliant plans, and provided an initial outlook for 2016. The company said fourth quarter earnings were likely to be $425 million lower than expected.
“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,” wrote Stephen Hemsley, CEO of UnitedHealth, in a statement.
If the insurer does forego ACA plans, it would be a significant hit to Obamacare, one of President Obama’s signature achievements in office. And it raises concerns about the economics of the health insurance offering. If the U.S.’s biggest insurer can’t make these plans work, then other insurers are likely struggling, as well. It also raises the prospect of an exodus by insurers out of the Obamacare program.
Still, UnitedHealth, despite its size overall, has a relatively small exposure to ACA. The company covers less than 550,000 people under Obamacare, or just 6% of the nearly 9.9 million who are insured by marketplace plans. Its stock fell 3.5% as of 10:50 a.m. ET following the news. Other large insurers, including Anthem (ANTM), Aetna (AET), and Cigna (CI), also declined in early trading.