UnitedHealth will lose about $4 billion in revenues from premiums due to its decision to reduce its participation in ACA exchanges from 34 states to just three in 2017, which will reduce enrollment by about one million members, according to a document filed with the Securities and Exchange Commission.
Although the ACA increased revenue and enrollment for UnitedHealth, the nation's largest health insurance company lost more than $1 billion on its ACA exchange health plans over two years.
- The insurance giant delivered an overall strong financial performance in 2016 due in large part to its Optum division, which provides pharmacy benefit management and healthcare technology services.
The ACA was supposed to result in a boom for business among health insurers, but the past few years have not played out as expected. Participation in ACA exchanges helped some payers to boost revenue and enrollment, while others have been losing money with health plans sold on the insurance exchanges.
Profit margins for payers operating on ACA exchanges in 2014 averaged -4.8%, according to a McKinsey & Company report, updated in May 2016. Payers operating at a national level were likely to lose even more. Their profit margins averaged -6.6% in 2014. These struggles were at least in part due to the fact that fewer people purchased insurance plans through exchanges than what was initially expected. The exchanges have been in need of younger people in good health purchasing this plans in order to remain financially stable.
The payers that have experienced financial success with the ACA exchanges have generally been the ones that have had pre-ACA experience managing narrow networks and serving low-income patients, as previously reported by Healthcare Dive. Centene, one payer that has been enjoying success on the exchanges, saw enrollment in individual health insurance plans increase from 146,100 to 537,200 in 2016 and it plans to continue expanding its ACA business.
While UnitedHealth will lose revenue as a result of its decision to leave ACA exchanges, that revenue represents a relatively small fraction of the money the payer brings in. UnitedHealth CEO Stephen J. Hemsley estimated that revenues will increase from about $185 billion in 2016 to $200 billion in this year.