UnitedHealth Might Pull Out of ACA Market; Agents Critical of Timing

NEW YORK (AP) -- UnitedHealth chopped its 2015 earnings forecast and the nation's largest health insurer has begun to question its future in public insurance exchanges, a key element in the nation's health care overhaul.

The company said Thursday that it would pull back on the marketing of its exchange business, a few weeks after open enrollment for that coverage began nationwide. It also said that it will decide in the first half of next year "to what extent it can continue to serve the public exchange markets in 2017."

The announcement marks a dramatic shift for the Minneapolis insurer, which said just last month that it was expanding into 11 more exchanges next year.

Chief Financial Officer David Wichmann told analysts in October that the company expected its exchange business to be "strikingly better" in 2016 and that the exchanges will mature into a strong growth market.

Instead, UnitedHealth sent letters early this week informing brokers it was cutting or eliminating commissions for those who sell its policies on the exchanges.

Ronnell Nolan, president and CEO of Health Agents for America, criticized UnitedHealth for the timing of the commission cut. Brokers are in the middle of open enrollment period, where new clients are signing up for health insurance. Other health insurers are also taking losses on the exchanges, but announced commission cuts prior to open enrollment, Nolan explained.

"Agents have invested thousands of dollars to prepare for open enrollment," she added. "Then overnight their practices are turned upside down. ... I’m getting calls from people saying 'I’m going to have to lay off people.' We continue to work and we get our commissions cut and cut and cut by everybody."

UnitedHealth still plans to expand into more exchanges, but medical claims have come in higher than expected on the exchanges overall, and its business in particular has deteriorated.

State-based health insurance exchanges opened a few years ago as a way for customers to buy individual health insurance, many with help from income-based tax credits.

The exchanges offered a potential growth boom to insurers, but also risk because UnitedHealth and others had little sense of the health needs of new customers. They also didn't know whether the new business would attract enough healthy customers to balance the expected enrollment of sicker customers who had previously not been able to find coverage.

Insurers have struggled to entice healthy customers to buy high-deductible insurance commonly sold on the exchanges. The plans require patients to first pay deductibles that can top several thousand dollars before most coverage begins.

Several nonprofit health insurance cooperatives established to compete with insurers on the exchanges announced earlier this year that they would fold. Those plans have been hurt in part by lower-than-expect payments from overhaul programs designed to support the insurers while they learn how to price coverage on the exchanges.

UnitedHealth initially sold coverage on only 4 exchanges before expanding to 24 this year. Despite the expansion, the exchange coverage remains a small part of its business.

UnitedHealth Group Inc. now expects 2015 earnings of about $6 per share, down from its previous forecast for $6.25 to $6.35 per share. The company had raised that forecast twice so far this year before reaffirming it last month.

UnitedHealth shares sank more than 5 percent, or $6.31, to $111 in premarket trading Thursday.

UnitedHealthcare "remains a strong supporter of sustainable efforts to ensure access to affordable, quality care for all Americans, and has advocated publicly for this for more than 20 years, including as one of the first businesses to focus on serving people through managed Medicaid and Medicare," the company said in a news release.