Private Payers News

Payers Bear Monetary Losses in Health Insurance Exchanges

Along with UnitedHealth Group, the insurance company Cigna is also finding that selling products via the health insurance exchanges could pose problems.

By Vera Gruessner

- Several medical insurance companies have experienced losses and financial troubles within the federal and state health insurance exchanges. UnitedHealth Group, for example, has considered pulling out of the health insurance exchanges starting in 2017 due to the monetary losses it has experienced. In 2016, UnitedHealth Group predicts its earnings to be anywhere from $7.10 to $7.30 per share, according to a company press release.

Health Insurance Marketplace

Currently, the health plan has dropped any marketing aimed at the individual health insurance exchanges for fiscal year 2016. By mid-2016, the company plans to evaluate whether it will continue offering medical coverage products via the health insurance exchanges next year.

“In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step,” Stephen J. Hemsley, Chief Executive Officer of UnitedHealth Group, stated in the press release.

“We continue to be pleased with the growth and overall performance of our Company outside of the individual exchange products and look forward to strong, positive and broad based earnings growth across our enterprise in 2016.”

Along with UnitedHealth Group, the insurance company Cigna is also finding that selling products via the health insurance exchanges could pose problems and may need more flexibility. Kaiser Health News reported that Cigna CEO David Cordani urges lawmakers provide more flexibility in the Affordable Care Act for insurers to design coverage options as well as provide a shorter open enrollment period through the exchanges.

While UnitedHealth Group is looking to move away from the state and federal insurance marketplaces, the Cigna CEO maintained that they are going to pursue offering health coverage options through the exchanges in 2016 despite the fact that the company is losing money through this particular area of business.

At this moment in time, Cigna has hit a smaller consumer base with a mere 230,000 customers in its repertoire. However, if its merger with Anthem is to succeed, the insurer is likely to grow quickly due to Anthem’s large role in the health insurance space.

This is one of the two largest mergers taking place in the health insurance industry today, as Aetna is also pursuing the right to acquire Humana. Cigna CEO David Cordani answered several questions posed by Kaiser Health News in an exclusive interview regarding the state of the company when operating within the exchanges as well as its plans regarding the merger.

“When the law put in place the exchanges, we took a bit of a different public position than many of our competitors. We saw the exchange marketplace as a potentially attractive long-term viable market. We also said we viewed 2014, 2015 and 2016 as Version 1.0 of that market and that it would take those three years for the market to shake itself out. We said from day one we didn’t expect to make money on it. We didn’t make money on it in 2014 and we aren’t making money on it in 2015,” the Cigna CEO explained.

When discussing how the Cigna-Anthem merger will benefit the consumer base, Cordani mentioned, “When you look at Cigna and Anthem, we are amazingly complementary… We’ll take their leading Medicaid program and our leading Medicare program and put them together to design solutions for the dual-eligible population. In terms of employer marketplace, we will be able to bring population health management programs to their employer programs and help expand the geographic footprint.”

Kaiser Health News reported on another area in which financial losses within the health insurance marketplaces could impact consumers. However, this impact could significantly harm the everyday purchaser of health coverage.

Due to the losses within the exchanges, large insurance companies are seeking to limit the way health plans are sold to individual consumers. This change could potentially affect the most ill patients seeking coverage as well as negatively impact future enrollment through the exchanges.

Specifically, Anthem, Aetna and Cigna have stated that they will end paying brokers sales commissions for enrolling members outside of the typical enrollment period. As such, these brokers are dis-incentivized from selling insurance plans to sick patients seeking coverage due to a job loss or other type of insurance loss.

In the future, revisions to the policies in the Affordable Care Act or the health insurance exchanges may be able to benefit health insurers and lead more to stay within the marketplaces without resorting to methods that may harm the consumer.