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UnitedHealth Group warns it could get out of Obamacare exchanges

UnitedHealth Group earnings warning highlights industry struggles with Obamacare.

UnitedHealth Group, the nation's largest health insurer, warned Thursday that it may exit the Affordable Care Act's exchanges in 2017, a potential blow to President Barack Obama's signature health care law.

The Minnesota-based carrier said its exchange-based business has not met financial expectations. The company said it expects significant losses on its individual health plans related to the 2015 and 2016 policy years.

The disclosure comes less than three weeks after the president of the company's Illinois insurance operations expressed optimism about its exchange-related business going into next year. UnitedHealthcare, the insurance subsidiary of UnitedHealth Group, expanded its individual exchange products from one county to 27 counties in Illinois for the 2016 policy year.

UnitedHealth Group also said last month that it expects better results from its ACA policies sold in about two dozen states in 2016. Nationally the company has about 550,000 people enrolled in ACA-compliant plans.

But in recent weeks, "expectations for exchange products have further deteriorated," Stephen Hemsley, UnitedHealth Group's CEO, said in a conference call.

He said the company's enrollees in the individual market have increased their use of medical services as the end of the year approaches. Hemsley also noted that growth expectations for individual exchange participation have tempered industrywide, as health co-operatives have failed.

"The combination of these factors suggests the overall exchange market profile is more negative than we had planned, with new market enrollment growth developing more slowly," Hemsley said.

A spokesman for the federal Department of Health and Human Services said UnitedHealth's announcement is not indicative of the ACA exchanges' strength and viability.

"The reality is we continue to see more people signing up for health insurance and more issuers entering the marketplaces, and at the end of January, we believe we'll be looking at another successful open enrollment — just like the last two," HHS spokesman Jonathan Gold said in a statement.

But UnitedHealth is not the only insurer struggling with the Affordable Care Act. Blue Cross and Blue Shield of Illinois, the state's largest health insurer, has boosted premiums on its individual policies an average of 17.8 percent, after its exchange-based business lost about $280 million in 2014.

Blue Cross also stopped offering a popular PPO plan on the public exchange that featured its broadest provider network. The insurance company offers another PPO, but the network doesn't include doctors at well-known academic centers like Northwestern Memorial Hospital, University of Chicago Medicine and Rush University Medical Center.

Unlike Blue Cross, UnitedHealthcare largely stayed out of the exchanges in 2014, the first year of the Affordable Care Act's public marketplaces for consumers to shop for insurance. The company dropped its conservative approach this year and made a big bet on the government-subsidized insurance program.

It enrolled about 28,000 people in Cook County as of the second quarter, according to Mark Farrah Associates, a provider of health plan market data.

UnitedHealth Group cut its 2015 earnings outlook by $425 million, or 26 cents a share. The forecast sent the company's shares sliding 5.6 percent to $110.63 in trading Thursday.

UnitedHealthcare is cutting costs by suspending marketing efforts and reducing or eliminating broker commissions in the exchange-based segment of its business. The company also said it will determine in the first half of next year whether it will stay in the exchanges in 2017.

"Participation in exchanges is not essential to our overall benefit offerings, but we remain hopeful these markets will eventually evolve into a viable coverage category for Americans," Hemsley said.

The exchange-based business represents about 1.2 percent of UnitedHealthcare's 45 million customers.

asachdev@tribpub.com

Twitter @ameetsachdev

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