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New York - UnitedHealth CEO Says Entering ObamaCare Marketplace A 'Bad Decision'

Published on: December 1, 2015 08:01 PM
By: AP
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FILE - In this April 29, 2014 file photo, Stephen Hemsley, president and CEO of  UnitedHealth Group, announces 75 jobs are being created within the company’s subsidiary, Optum, which works in health care services and technology support, in Southfield, Mich.  (AP Photo)FILE - In this April 29, 2014 file photo, Stephen Hemsley, president and CEO of UnitedHealth Group, announces 75 jobs are being created within the company’s subsidiary, Optum, which works in health care services and technology support, in Southfield, Mich.  (AP Photo)

New York - UnitedHealth CEO Stephen Hemsley offered a mea culpa Tuesday for his company’s decision to dive deeper into the Affordable Care Act’s public insurance exchanges, a move that ultimately forced the nation’s largest health insurer to cut its earnings forecast.

Hemsley told investors that the insurer should have learned more about the still-new business, and expanding before it did that was “for us, a bad decision.” UnitedHealth jumped into two dozen state-based exchanges for 2015 after selling coverage on just four in 2014.

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“It will take more than a season or two for this market to develop,” Hemsley said during a webcast of the company’s annual meeting with investors in New York.

UnitedHealth lowered its 2015 outlook last month after detailing steep losses from the exchange business. The insurer also said its exchange business — a small slice of its overall portfolio — was weighing on its 2016 earnings forecast, and it would decide next year whether to even participate in the exchanges in 2017.

That announcement shook health insurance stocks and raised concern about the long-term viability of the state-based insurance exchanges, a key component of the overhaul’s push to expand coverage to millions of uninsured people. Several smaller, nonprofit insurance cooperatives also have said that they would stop selling coverage on the exchanges for 2016.

But UnitedHealth’s forecast revision last month also prompted several rivals to reaffirm their own outlooks and their loyalty to the exchanges.

Hemsley said Tuesday that “time will tell” whether the exchanges can eventually yield a viable business for UnitedHealth.

Insurers have struggled, in general, to attract and keep enough premium-paying healthy customers to their exchange coverage to balance those who use more health care.

Hemsley said UnitedHealth tried to grow conservatively, by selling coverage in markets where it already had a network of established service providers. But the exchange business has been hurt in particular by customers who signed up for coverage outside designated enrollment windows and then submitted a lot of medical claims.

Insurers also say they’ve been hurt to a lesser extent by customers who sign up for coverage and then stop paying their premiums.

“We did not believe it would form this slowly, be this porous or become this severe,” Hemsley said.

The CEO said his company will narrow decisions on whether to stay in the exchanges down to individual products and markets.

“We will not knowingly lose money on this product line in 2017,” he said.

He added that any decisions on the exchange business may not be permanent. Hemsley noted that the Minnetonka, Minnesota-based insurer pulled back from the market for Medicare-related coverage in 1999 but now has a large presence in that business.

Health insurance is UnitedHealth’s largest business by far, but the company also has been touting its growing Optum segment, which provides pharmacy benefits management and technology services and runs clinics and doctor’s offices

Overall, the insurer expects 2016 earnings of $7.10 to $7.30 per share on revenue ranging from $180 billion to $181 billion.

Analysts forecast, on average, earnings of $7.21 per share on $183 billion in revenue, according to FactSet.

Shares of UnitedHealth climbed almost 2 percent, or $2.11 to $114.82 in midday trading Tuesday, while broader indexes were up less than 1 percent.



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Read Comments (10)  —  Post Yours »

1

 Dec 01, 2015 at 08:04 PM Anonymous Says:

It took all this time to realize that !!!!!

2

 Dec 01, 2015 at 09:08 PM hashomer Says:

I'm sure this CEO trainwreck has great medical insurance. Of course he's against 20 million uninsured Americans from getting what he has. Down with that.

3

 Dec 02, 2015 at 12:29 AM CommonSense Says:

Oy nebich. He's only making millions instead of billions?

4

 Dec 02, 2015 at 12:36 AM Marsh Says:

Reply to #2  
hashomer Says:

I'm sure this CEO trainwreck has great medical insurance. Of course he's against 20 million uninsured Americans from getting what he has. Down with that.

No just you liberals have messed up things even worst. The whole Obama-doesn't-care is a fraud.
You can save your dr----Lie
Premiums will go down 25%-----LIE.
Liberals just lie.
Stop drinking the kool aid.

5

 Dec 02, 2015 at 07:11 AM heshysquirtz Says:

Reply to #2  
hashomer Says:

I'm sure this CEO trainwreck has great medical insurance. Of course he's against 20 million uninsured Americans from getting what he has. Down with that.

Good call. So what if he is accountable to shareholders? He should make bad business decisions to support your entitlement lifestyle.

Tax the rich!

6

 Dec 02, 2015 at 09:03 AM No, haShomer Says:

The CEO has a job to do, keep the firm running in the right direction. Insurance executives always are concerned with an imbalance, only sick people applying. Obamacare was supposed to attract a fair mix but did not.
years ago, Dentists signed up for capitation plans, plans where the Dentist wa spaid a fee per year regardless of how much or little work was needed. The honest Dentists looked at broken mouths and spent time and money fixing years of neglect. They ssumed they were saving money in preventing future needs. They did not realize all the patients would leave after getting their needs fixed.

7

 Dec 02, 2015 at 09:08 AM puppydogs Says:

Reply to #1  
Anonymous Says:

It took all this time to realize that !!!!!

Exactly, we all saw this in 2008.

8

 Dec 02, 2015 at 12:18 PM Anonymous Says:

"But the exchange business has been hurt in particular by customers who signed up for coverage outside designated enrollment windows and then submitted a lot of medical claims."

How can one sign up outside designated enrollment. I thought you can't do that? I thought whatever plan you have under open enrollment is the one you keep? You can't switch mid-year?

9

 Dec 02, 2015 at 12:23 PM Anonymous Says:

Reply to #2  
hashomer Says:

I'm sure this CEO trainwreck has great medical insurance. Of course he's against 20 million uninsured Americans from getting what he has. Down with that.

Mathematiclly the numbers don't add up. Sorry the government pays peanuts for government insurance. If you want to cover 20 million Americans,then pass universal health. But this quasi government/ private plan is just a complete disastor and is not affordable. In fact, it will hurt the 20 million that you seek to insure as well. And by the way another 100 million, mostly small business owners have seen premiums and copays and deductibles skyrocket. Again thats because comapnies have to take from peter to pay pan. The government doesn't pay them enough to afford covergae f or those 20 million. Thus charge the extra 100 million more.At-least Hillary is begining to address that issue.

10

 Dec 02, 2015 at 04:02 PM Anonymous Says:

Unreal how the cool aid drinking liberal idiots here still can't admit obama's policies have all failed! Now they're blaming the CEO instead of laying blame where it belongs, squarely on obama's shoulders! ("You can keep your health care!") wow. Talk about dishonest... And notice how at least some of the Obama lovers are too ashamed to even comment here! That is at a least a good first step,,, where's AYingle???

11

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