UnitedHealth to leave Obamacare market in California

UnitedHealth Group Inc. is leaving California's insurance exchange at the end of this year, state officials confirmed Tuesday.

The nation's largest health insurer announced in April it was dropping out of all but a handful of 34 health insurance marketplaces it participated in. But the company had not discussed its plans in California.

UnitedHealth's pullout also affects individual policies sold outside the Covered California exchange, which will remain in effect until the end of December.

"United is pulling out of California's individual market including Covered California in 2017," said Amy Palmer, a spokeswoman for the state exchange.

[Also: UnitedHealthcare to exit all but 'handful' of Obamacare markets in 2017]

It's expected that UnitedHealth will continue offering coverage to employers in California and to government workers and their families through the California Public Employees' Retirement System.

Representatives of UnitedHealth didn't immediately respond to a request for comment Tuesday. In April, UnitedHealth's Chief Executive Stephen Hemsley said the company was unwilling to keep losing money on the exchange business overall.

"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," Hemsley said in a conference call with investors in April.

UnitedHealth just joined the California exchange this year, and it only had about 1,200 enrollees so the immediate impact on overall coverage numbers is minimal. The number of individual policyholders outside the state exchange wasn't immediately known.

Palmer said UnitedHealth policyholders will know their options for 2017 coverage when health plans and rates for next year are announced in July.

Critics of the Affordable Care Act have seized on the company's exit, state by state, as further evidence the health-law insurance exchanges aren't sustainable financially and that premiums will rise even higher for consumers.

[Also: Harvard Pilgrim bullish on exchange business despite high-profile UnitedHealthcare exit]

The Obama administration has countered that the number of health plans offering exchange policies has increased since the 2014 launch, and that it expects the individual market will continue to stabilize as adjustments are made.

Many consumer groups welcomed UnitedHealth's arrival in Covered California in order to give people more choice and inject more competition into the market. The top four insurers in the exchange, led by Blue Shield of California and Anthem Inc., control more than 90 percent of Covered California enrollment.

The state exchange had limited UnitedHealth to selling exchange plans in several smaller markets for 2016 because it didn't participate the first two years. Those areas are predominantly rural counties in Northern California, but they also include Santa Barbara, Ventura and San Luis Obispo counties.

In February, Covered California's executive director, Peter Lee, criticized UnitedHealth for blaming the federal health law for its heavy losses instead of taking responsibility for its own business mistakes.

Lee said UnitedHealth made a series of blunders on rates and networks that led to steep losses on individual policies across the country.

"Instead of saying, 'We screwed up,' they said, 'Obamacare is the problem and we may not play anymore,'" Lee said in a February interview with California Healthline. "It was giving an excuse to Wall Street and throwing the Affordable Care Act under the bus."

Lee had also previously knocked UnitedHealth for sitting out the first two years of Covered California before joining in 2016.

Like Healthcare Finance on Facebook

In April, UnitedHealth said it had nearly 800,000 enrollees on exchange plans across the country. It expected that number to fall to about 650,000 by December as people drop off coverage or find other insurance.

New York and Nevada have said that UnitedHealth will participate in the individual markets there and the company has filed plans to sell similar plans in Virginia.

This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

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

Twitter: @HC_Finance