In order for insurance companies to make money, they rely on the premiums that healthy people pay to cover the medical bills for the sick people. If an insurance company sets premiums that are too low, or if they insure more sick people than healthy people, they can suffer great losses. Insurers who are new in the market may not be familiar with these risks.
Currently, United Health has been slower than many of its rivals when it comes to selling policies on the Obamacare market. The news about United Health may indicate that other insurers are struggling as well. United Health is one of the largest insurers, and has years of experience and an excellent reputation. Since they are considered one of the most sophisticated health plans around and they are struggling, it is difficult to believe that other insurers are not struggling as well.
The Obama Administration recently made a statement that more people are signing up for the Affordable Care Act this year than last. Since enrollment began on November 1st, about 1.1 million people signed up, and that was just in the first week. In 2014, less people than that signed up from the beginning of enrollment all the way through Thanksgiving week.
Currently, there are more people signing up for health insurance and more insurers are entering the Marketplaces. These statistics cannot prove the Marketplace’s viability and strength.
According to United Health, they are going to be suspending the marketing of their individual exchange plans. Also, they are going to be eliminating or cutting the commissions for brokers who are selling the coverage in a variety of markets.
550,000 in Obamacare
Around 9.9 million people currently have health insurance through state and U.S. Run insurance markets as of June 30th. Of those people, United Health covers less than 550,000 on the Obamacare exchanges.
On Thursday, United Health made a statement saying that the company is currently evaluating the viability of the insurance exchange product segment. They stated that they will need to begin determining during the first half of 2016 if it can serve public exchange markets through 2017. United Health’s Chief Financial Officer, David Wichmann told analysts during a conference call on October 15th, that he believes that there will be a better performance on the insurance exchange starting next year.
United Health is not the only insurer that is struggling. Other insurance companies are struggling to make a profit from government run marketplaces that were created by Obamacare. Due to charging too little to cover the cost of their patients’ medical care, several non-profit co-op plans have failed. Another reason is that the Obama administration had a fund to stabilize the market, and paid out only 12.6 percent of what the insurance companies requested. Many of these companies are also offering very low premiums so they can compete with their rivals, and now cannot turn a profit.
Other major insurers, Anthem and Aetna, has stated that they will be patient while the exchange business has a chance to develop. Eventually, they expect to turn a profit. Currently, Aetna has 1.1 million individual members, while Anthem has 824,000.
According to Mark Bertolini, Aetna’s CEO, it is too early to call it quits on the ACA land other exchanges. He believes there is still a big opportunity for the company. He added that things are still challenging, and they reduced the states where they offer coverage from 17 to 15.
Anthem issued a statement in late October, saying that they don’t expect the individual exchange business to improve until 2017 or 2018.
According to United Health, earning per share will likely be $6.00 this year, which is down from $6.25 to $6.35. Next year, they expect that earnings per share to be between $7.10 and $7.30. They plan an investor day on December 1st.