UnitedHealth CEO defends possible exit of Obamacare exchanges

By Caroline Humer

NEW YORK (Reuters) - UnitedHealth Group Inc's (N:UNH) chief executive officer on Tuesday defended the company's possible withdrawal from the Obamacare health insurance exchanges, calling the 2015 expansion into two dozen states a "bad decision."

CEO Stephen Hemsley said that it had made its best effort to keep costs down by selling plans with small doctor networks, and that it had priced them competitively. The company signed up members with better health than the overall exchange population, but it still lost money, he said.

"We could not sustain the eroding level of losses on our exchange products," Hemsley said during its annual meeting with investors. UnitedHealth last month warned of mounting losses and said it might pull out of the exchanges.

That news surprised investors, pulling down shares of UnitedHealth and competitors on the exchanges, including Aetna Inc (N:AET) and Anthem Inc (N:ANTM). The exchanges were created under the Affordable Care Act, also known as Obamacare, and provide insurance to more than 9 million individuals.

UnitedHealth shares gained 1.8 percent, or $2.02, to $114.73 in midmorning trading while Aetna was up 2.4 percent and Anthem gained 1.3 percent.

Hemsley said it was not yet known if the exchange problems were limited to UnitedHealth, or if they reflected a structural issue with the exchanges. He told investors that in order to stabilize, the market needs a bigger, more stable pool of enrollees.

Under the law, insurers cannot refuse coverage to anyone, and many insurers including Aetna and Anthem have said some members are using medical services heavily, contributing to losses. Members enroll during autumn, but can also pick up coverage during the year for life changes, like losing a job, and UnitedHealth said those members were the most costly.

"There likely won't be a single broadly accepted marketplace conclusion for some time," Hemsley said. The company formed its view based on its own business, he said, but indications were that other insurers in the marketplace were seeing similar dynamics.

In the first half of 2016, UnitedHealth will decide whether to take part in any given region after doing a "product by product, market by market" review, Hemsley said.

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Hemsley said that a pullback now does not mean it will permanently exit the exchanges. UnitedHealth largely withdrew from government-paid insurance markets including Medicare Advantage and Medicaid and then entered again once they were more stable, he said.