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Why United Healthcare's Exit From Obamacare Matters

UnitedHealthcare will operate only in a “handful” of health insurance exchanges in 2017, down from 34 states this year, company officials said Tuesday.

The company did not provide the anticipated details in its first-quarter earnings announcement released Tuesday morning or in a subsequent teleconference with securities analysts. But a spokesman confirmed Nevada and Virginia would be among the states where it will retain a presence. In the past week, UnitedHealthcare said it would leave Georgia, Michigan, and Arkansas.

UnitedHealth Group, the parent company, warned in November it was considering quitting most marketplaces because of escalating losses on the Obamacare plans. The company on Tuesday said it lost $475 million last year from the marketplace plans and was on target to lose $650 million in 2016.

UnitedHealth is the nation’s largest health insurer overall, but it’s not the biggest in the individual insurance markets that the exchanges serve.

Even so, UnitedHealth’s plan to dramatically curtail involvement in the exchanges would severely limit competition in parts or all of about 10 states — mostly in the South and Midwest, according to an analysis from the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.) That could mean higher premiums for consumers in states and counties left with only one or two insurers, unless another company enters those markets. Oklahoma and Kansas would be left with only one insurer if UnitedHealthcare pulls out.

Obama administration officials sought to play down the impact of the UnitedHealth’s announcement saying the company was not the lowest-cost plan in many of the biggest states. For example, at least 95% of the populations of Florida, Illinois, and Ohio live in a county where they could find a cheaper plan this year, an administration spokesman said.

So far, UnitedHealthcare is the only large carrier to announce it will leave the marketplaces in multiple states.

“We have full confidence, based on data, that the marketplaces will continue to thrive for years ahead,” said a spokesman for the U.S. Department of Health and Human Services. “The marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer.”

United officials said they were unwilling to keep losing money.

“The smaller overall market size and shorter term, higher-risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis,” CEO Stephen Hemsley said in a conference call with investors Tuesday.

“Next year, we will remain in only a handful of states, and we will not carry financial exposure from exchanges into 2017,” Hemsley said.

He confirmed Harken Health, the company’s subsidiary that markets a boutique-style health plan, would continue next year. It currently operates in Atlanta and Chicago.

Despite the Obamacare losses, the Minnetonka, Minnesota-based company made $1.6 billion in net income on $44.5 billion in revenue in the first quarter of 2016. During the same period last year, UnitedHealth Group made $1.4 billion in net income on $35.8 billion in revenue.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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