UnitedHealth drops Obamacare following losses

America’s largest health insurance provider, UnitedHealth has announced its intention to withdraw Affordable Care Act coverage from the majority of states, following losses of $1bn on the public exchanges over the last year, reportedly as a direct result of selling individual policies under the ACA. As UnitedHealth has projected a further $650m losses for 2016, CEO Stephen J. Hemsley suggested that offering policies to a short term, high risk segment in the smaller market of the ACA is not sustainable for the company. The impact of UnitedHealth’s decision is expected to be modest, but analysts suggest if the company chooses to leave all the markets without being replaced there will be a marked effect on insurer competition in rural areas, particularly the Southern states.

The company would not specify which states it planned to exit. It appears to be staying in Virginia and Nevada next year, but it is not known what other states remain attractive. A small unit of UnitedHealth, which offers exchange plans that feature a primary care clinic, is being tested in some states, including Georgia, where United says it is pulling out.

Despite the concerns over United’s decision, just how much of its struggles are because of a lackluster embrace of the market and small presence is unclear. The company has 795,000 people in its plans, a small fraction of the roughly 13 million people who have signed up for 2016. Without large numbers of customers, insurers are unable to demand low prices from hospitals and doctors. They also cannot balance the high cost of very sick patients with the low expense of more healthy customers.

The number of insurance carriers for every state has increased every year, Ben Wakana, a spokesman for the Health and Human Services Department, which oversees the exchanges, said in a statement. “With millions of Americans insured through the marketplaces, it’s clear that this is a growing business for insurers,” he said.

While United is not alone in finding the new market challenging, some insurers, especially those that have traditionally served low-income customers in Medicaid programs, appear to be more successful. “This is still a new market, and both entrants and exits come with the territory,” Cynthia Cox, one of the authors of a recent analysis from the Kaiser Family Foundation, said of the impact if UnitedHealth were to leave all of its markets.

While the analysis found the overall impact to be modest, if UnitedHealth left all the markets and was not replaced by another carrier, the Kaiser analysis found, “the effect on insurer competition could be significant in some markets — particularly in rural areas and Southern states.”