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UnitedHealth Group Inc.'s first foray with the health insurance exchanges turned out to be worse than expected as it lost $720 million on its individual-market health plans in 2015, the company said Tuesday, nearly $300 million above estimates made a few months ago.
The massive deficit on Affordable Care Act plans consequently ate away at UnitedHealth's fourth-quarter profit, which dropped 19% to $1.22 billion. The company also booked $95 million in expected losses from a managed Medicaid contract. However, UnitedHealth's full-year profit still increased 3.5% year over year, totaling $5.81 billion.
Last November, UnitedHealth forecast a $425 million net loss on its ACA policies, including a $275 million shortfall that was written off for its 2016 plans. The final loss came in at $720 million, including $245 million set aside for 2016 losses, UnitedHealth said.
The health insurer and services conglomerate said the poor experience in the ACA exchanges was due to sicker-than-average consumers enrolling in its health plans and a surplus of people signing up outside of the open-enrollment window. UnitedHealth may exit the ACA marketplaces as a result and will make a decision in the first half of this year.
Despite the failed exchange experiment thus far, UnitedHealth continued to expand its empire. Fourth-quarter revenue increased 30% to $43.6 billion, and full-year revenue for 2015 jumped 20% to $157.1 billion. Optum Inc., UnitedHealth's services and analytics subsidiary, continues to enlarge at a rapid pace due to natural growth as well as acquisitions. Optum's year-end revenue soared 42%, while UnitedHealth's health insurance business, UnitedHealthcare, grew at a 10% clip.
UnitedHealth had 46.4 million medical members as of Dec. 31.
Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.
(Reuters) — The New York Attorney General has ordered UnitedHealth Group to pay a $100,000 fine after an investigation found the insurance provider engaged in anti-competitive practices involving elder and long-term care products, according to a person familiar with the matter.