UnitedHealth loses $720M on exchange plans in 2015

Though its other business lines continue to perform well, UnitedHealthcare lost $720 million on its Affordable Care Act-compliant plans in 2015, the country's largest insurer said in its fourth-quarter earnings report Tuesday.

That includes a $245 million loss in the fourth quarter for what the insurer calls the "advance recognition of 2016 losses." As a result, the company's full-year 2015 earnings from operations of $6.8 billion decreased by $238 million compared to 2014, as operating margins declined to 5.1 percent.

United made waves in late November when it revised its 2015 earnings outlook to account for continuing struggles with its ACA-compliant business, with CEO Stephen J. Hemsley saying the company would reconsider its participation in the exchanges past 2016, as "we can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself."

On an earnings call with analysts Tuesday, President and Chief Financial Officer David Wichmann reiterated that position, saying by midyear the insurer will decide "to what extent, if any" it will participate on the exchanges in 2017.

But to account for its mounting losses on the exchanges, United has withdrawn its platinum products, decreased plan prices and stopped commissions for the sale of exchange plans, he said. The insurer also is focusing on clinical interventions for its 700,000 exchange plan members, a number it expects to increase as open enrollment concludes and then start to decline. Overall, the insurer has 46.4 million medical members, according to Wichmann.

Fellow insurer Humana has also said it expects losses on the exchanges in 2016, though the CEO of Aetna, the company that plans to acquire Humana, recently said it's too early to give up on the exchanges.

Even amid United's exchange struggles, the overall outlook for the company appears to be improving. The insurer's 2015 revenues of $157.1 billion grew $26.6 billion--20 percent--year over year, according to its earnings report.

"The balance of our total business is thriving," Hemsley said on the earnings call, adding that "2016 is off to a strong start--considerably stronger than 2015."

That is, in large-part, thanks to the performance of its health services arm, Optum, which saw its revenues grow 42 percent in 2015. Optum's "strong organic growth and strategic investments" led it to contribute nearly 40 percent of United's full-year earnings from operations, the company said.

To learn more:
- here's the earnings report

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