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December 01, 2015 12:00 AM

UnitedHealth's Hemsley calls entry into ACA exchanges 'bad decision'

Bob Herman
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    Hemsley

    Seeking to mollify investor concerns over large losses from the Affordable Care Act, UnitedHealth Group CEO Stephen Hemsley said jumping into the exchanges this early was a “bad decision” and blamed himself.

    “In retrospect, we should have stayed out longer,” Hemsley said at the company's annual investor conference Tuesday in New York City. “It will take more than a season or two for this market to develop.”

    UnitedHealth, the largest U.S. health insurer by revenue, created an industrywide stir last month after suggesting it may exit the ACA's insurance marketplaces in 2017 after suffering nine-figure losses last year and projecting more losses in 2016. UnitedHealth sat out the exchanges in 2014, while competitors like Anthem and Aetna invested more time and resources. The exchanges represent only 1.1% of UnitedHealth's total membership.

    Many of UnitedHealth's exchange members were sicker than expected and therefore used more medical services, the company said last month. However, Hemsley said Tuesday that his company's risk pool was still better than the market average, adding that “time will only tell” as to whether the exchanges will succeed in the long term.

    Other insurers, including Aetna, Anthem and Kaiser Permanente, have reaffirmed their commitments to the exchanges. But the first two years of the exchanges have created some unease about how quickly the new individual market will stabilize.

    Highmark Health CEO David Holmberg recently told Modern Healthcare that UnitedHealth's announcement was the “canary in the coal mine” for the exchanges, and that “the jury's still out about how this is ultimately going to play out.” Highmark lost $318 million on the exchanges in the first half of this year.

    “There's gotta be an evolution here,” Holmberg said. “The government's gotta play a role in that, and so do we as we shape the kinds of offerings that are on the exchanges.”

    UnitedHealth will make a final decision about its exchange participation sometime during the first half of 2016. If the company decides to throw in the towel, that doesn't preclude it from re-entering the exchanges at a later date, Hemsley said. But UnitedHealth will not sacrifice short-term earnings to prop up the exchange business.

    “We will not knowingly lose money in this product in 2017,” Hemsley said.

    UnitedHealth estimates its revenue in 2016 will be as high as $181 billion, which would be about 26% higher than this year's projected revenue of $143 billion. Most of the growth will come from its health services division, Optum, as well as Medicare Advantage and Medicaid. Dan Schumacher, the chief financial officer of UnitedHealthcare, expects next year's medical-loss ratio will be 81.5%, slightly lower than this year.

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