The nation’s largest health insurance carrier is suffering large losses due to its inaugural participation in Affordable Care Act exchanges last year.
UnitedHealth Group Inc. reported Tuesday that it lost $720 million its individual-market health plans in 2015 – nearly $300 million more than it had originally estimated a few months ago.
And while the insurer’s full-year profit still increased 3.5% year over year to total $5.81 billion, the staggering losses affected its insurer’s fourth-quarter profits, which fill 19% to $1/22 billion. UnitedHealth is also expecting to book $95 million in losses from a managed Medicaid contract.
UnitedHealth had originally forecast a $425 million net loss on its ACA policies in November. However, sicker-than-average consumers enrolling in its health plans and a surplus of people signing up outside the open-enrollment window caused losses to surge. The deficit was so great, UnitedHealth also lost $245 million it had set aside to mitigate against 2016 losses.
The insurer has reacted to its losses swiftly, having slashed broker commissions up to 80% through the end of 2015 and eliminated any pay to brokers altogether beginning this month.
“These adjustments are consistent with our long-stated approach to carefully evaluate and better understand the dynamics of exchanges as they have become clearer over time and adjust accordingly,” the insurer said in statement.
Agents are expected to lose thousands of dollars a year as a result of the change, and many are now saying they will stop recommending the carrier’s plans to clients.
“While we want to provide the right solutions, I feel we’re losing a degree of objectivity,” said Rob Ferguson, an agent with Absolute Insurance Solutions in North Carolina. “It may be a less expensive plan – and that’s what you’re ultimately looking for – and as an agent, I’m going to make you aware of it, but I’m not going to facilitate that process through the marketplace because I’m really not getting paid for my time.”
Other rumors suggest UnitedHealth will pull out from the exchanges next year – a move that could seriously diminish consumer choice.
“The only time I’ve seen this before is when insurers are required by government to sell a product they do not particularly want to sell,” Mark Hall, a law professor with Wake Forest University, told North Carolina’s News Observer. “Here, this seems consistent with an insurer that no longer wants to sell through the exchanges…but is not allowed to withdraw immediately, so it’s pushing its commissions to zero until it’s allowed to exit.”