UnitedHealth to stop selling ACA plans in NC and most other states

UnitedHealth, the nation’s biggest health insurer, will shrink its participation in Affordable Care Act insurance exchanges to only a handful of states next year after expanding to nearly three dozen states this year.

CEO Stephen Hemsley said Tuesday that the company expects losses from its exchange business nationwide to total more than $1 billion for this year and last. He added that the company cannot continue to sell Affordable Care Act policies due partly to the higher financial risk that comes with those customers.

As part of the pullback, the insurer notified the N.C. Department of Insurance on Monday that it plans to stop offering individual coverage under the Affordable Care Act in 2017. UnitedHealth has been selling ACA policies in North Carolina for two years and operates in 77 counties in the state.

UnitedHealth is the second insurer to recently decide not to participate in North Carolina’s ACA market. Last fall Humana withdrew its proposal to offer individual coverage through the federal exchange in four counties, and the company never sold ACA coverage here.

The state’s biggest insurer, Blue Cross and Blue Shield, has also said it’s weighing whether to stop selling ACA policies here. Blue Cross, which sells coverage through the federal exchange in all 100 North Carolina counties, has lost about $1 billion on ACA plans in the past two years, but the losses were reduced to $405 million after compensation from federally-created assistance programs.

The state currently has three ACA insurers: Blue Cross, UnitedHealth and Coventry Health Care of the Carolinas, which is owned by Aetna. If Blue Cross bows out of the market, many in North Carolina would lose access to federally subsidized health insurance, as Coventry operates in just 39 counties in the state.

North Carolina stands out for one of the nation’s highest ACA enrollments, exceeding 600,000 people, but is also emerging as one of the nation’s most precarious ACA markets, with high rates of subsidization and cost overruns. N.C. Insurance Commissioner Wayne Goodwin, a Democrat up for reelection this fall who approved an average 32.5 percent rate increase for Blue Cross this year, has expressed concern that the market is unsustainable and will drive out all remaining insurers from the state.

“I am disappointed UnitedHealthcare made the business decision to leave our individual health insurance market, and I remain concerned about North Carolinians’ access to quality, affordable health care coverage,” Goodwin said in a statement. “Clearly, there is much work to be done by Congress and our state legislature to better protect consumers and rebuild our private health insurance market.”

The U.S. Department of Health and Human Services said Tuesday that UnitedHealth accounts for just 6 percent of ACA enrollment nationwide and its withdrawal will have a minimal effect on the health care marketplace.

“As with any new market, we expect changes and adjustments in the early years with issuers both entering and exiting states,” the agency said in a statement. “We have full confidence, based on data, that the Marketplaces will continue to thrive for years ahead.

“The number of issuers per state has grown year-over-year,” the agency said. “The Marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer. That data shows that the future of the Marketplace remains strong.”

UnitedHealth has not disclosed how many customers it has in North Carolina under the ACA, but if the company had just 6 percent of enrollment here, it would have under 37,000 customers. Blue Cross is estimated to have about 300,000 ACA customers in the state, about half the state’s total ACA enrollment.

UnitedHealth said it now expects to lose $650 million this year on its exchange business, up from its previous projection for $525 million. The insurer lost $475 million in 2015, a spokesman said.

In a bid to discourage sales of ACA plans, UnitedHealth in January stopped paying sales commissions to independent agents who sold the individual coverage.

UnitedHealth has already decided to pull out of Arkansas, Georgia and Michigan in 2017, and Hemsley told analysts during a Tuesday morning conference call that his company will not carry financial exposure from the exchanges into 2017.

“We continue to remain an advocate for more stable and sustainable approaches to serving this market,” he said.

UnitedHealth moved slowly into this newly created market by participating in only 4 exchanges in their first year, 2014. But the company expanded to two dozen exchanges last year and said in October it would add to that total. It currently participates in exchanges in 34 states and covers 795,000 people.

A month after announcing its latest exchange expansion, UnitedHealth started voicing second thoughts. The insurer said in November that it would decide by the first half of this year whether to even participate in the market for 2017.

Insurers say they have struggled, in particular, with customers who have signed up for coverage outside regular enrollment windows and then dumped expensive claims on their books, a problem the government has said it would address.

Blue Cross has expressed similar frustrations, saying that people are signing up for expensive procedures and then dumping their coverage. The Chapel Hill insurer has said the most expensive 5 percent of its ACA pool paid just $108 million in premiums but cost the company $1.28 billion in medical expenses in 2015.

A dozen nonprofit health insurance cooperatives created by the ACA to sell coverage on the exchanges have already folded, and the survivors all lost millions last year.

Other publicly traded insurers like Aetna have said that they have lost money on this business as well. But some companies, like Molina Healthcare in California, have said they have managed to turn a profit from the exchanges.

Analysts expect other insurers to also trim their exchange participation in 2017, especially if they continue to struggle with high costs.

UnitedHealth announced first-quarter results Tuesday that beat analyst expectations. The company also raised its forecast for 2016.

Associated Press contributed.

This story was originally published April 19, 2016 at 6:07 PM with the headline "UnitedHealth to stop selling ACA plans in NC and most other states."