UnitedHealth Group to remain in ‘handful’ of exchanges in 2017

UnitedHealth Group will operate only in a 'handful” of health insurance exchanges in 2017, the company's chief executive said Tuesday, down from more than 30 states this year.

In November, the nation's largest health insurer, based in Minneapolis, said it was reviewing the new exchange business due to financial losses on policies sold through the marketplaces launched under the federal health law.

UnitedHealth Group currently competes on exchanges in 34 states, including Iowa. The insurer reportedly plans to withdraw from health insurance marketplaces in Arkansas, Michigan and parts of Georgia, according to the Washington Post. A spokesman confirmed the reports that the insurer will remain in Nevada and Virginia.

The moves have been anticipated since late last year when UnitedHealth executives said the insurer had suffered financially and threatened it might leave the health exchanges altogether in 2017.

In January, the insurer reported that it expected a loss of $1 billion in the exchanges over 2015 and 2016.

'The smaller overall market size and shorter-term, higher-risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis,” chief executive Stephen Hemsley said in a conference call with investors.

'Next year, we will remain in only a handful of states, and we will not carry financial exposure from exchanges into 2017,” Hemsley said.

Whether the company plans to remain in Iowa is yet to be known.

Chance McElhaney, spokesman for the Iowa Insurance Division, said Tuesday that insurers have until May 11 to submit forms and rates for Affordable Care Act-compliant plans to the Iowa Insurance Division.

'We won't know much about the 2017 market until that deadline passes,” he said.

UnitedHealthcare entered the Iowa exchange market in time for the 2016 enrollment season, selling individual plans in 76 counties, including Linn and Johnson.

If UnitedHealthcare were to leave the Iowa marketplace, Iowans still likely would have several options to purchase subsidy-eligible plans.

' Coventry Health Care of Iowa - a division of Aetna Inc. - has sold plans since 2013.

' Minneapolis-based insurer Medica entered the state's marketplace in 2015.

' Wellmark Blue Cross and Blue Shield announced in October 2015 that it would participate in the 2017 enrollment season.

Before the call, the Obama Administration attempted to downplay any departures by UnitedHealth.

'We have full confidence, based on data, that the Marketplaces will continue to thrive for years ahead. The number of issuers per state has grown year-over-year,” Health and Human Services spokesman Ben Wakana said in a statement released Monday morning. 'The Marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer.”

Although UnitedHealth is the nation's biggest health insurer, it was slow to enter the exchanges in 2014, rolling out plans in just four states initially. In the call, executives said they cover 795,000 people through the exchanges, and expect that number to drop to 650,000 by December.

The true effect of UnitedHealth's departure may be as an indicator of insurers' feelings about the exchanges as the competitive impact may be relatively modest overall.

A new report by the Kaiser Family Foundation analyzed the effect if UnitedHealth were to drop out of all the exchanges where it participates. It found that 1.1 million people enrolled through the exchanges would have one insurer left from which to choose if the carrier withdrew from every market and no other companies rushed in to fill the gap.

According to a separate Kaiser Health analysis, Iowa has one of the lowest marketplace participation rates in the country, with only about 15 percent of the state's population enrolled in a marketplace plan.

'This quarter, with the majority of our 2016 exchange members new to us, we have been appropriately cautious in our reserve estimates, reflecting an additional $125 million in full-year 2016 exchange losses,” said David Wichmann, the company's chief financial officer, during Tuesday's conference call. 'These were fully absorbed in this quarter and fully considered for the year in our guidance range, and ...

we do not anticipate financial exposure from exchanges in 2017.”

UnitedHealth raised its financial guidance for 2016 after reporting first-quarter earnings Tuesday that beat analyst expectations.

The company posted $1.61 billion in net earnings on $44.5 billion in revenue. During the same period last year, UnitedHealth Group saw net earnings of $1.41 billion on $35.8 billion in revenue.

Membership in the company's U.S. health insurance plans grew to 43.6 million people at the end of March from 42.3 million people at the end of 2015.

Based on the results and trends, UnitedHealth Group said it now expects 2016 revenue of approximately $182 billion.