UnitedHealth Dives Into Obamacare Exchanges

UnitedHealth Group stayed out of most Obamacare marketplaces in the first year, taking a wait-and-see approach. It appears the rocky months after the debut of healthcare.gov didn’t scare the nation’s largest health insurer, which is following through on plans to enter many more state exchange markets, including AlabamaIllinois, Indiana, and Washington.

“This was consistent with how we positioned this right from the beginning, that we would observe the first year for the most part and then endeavor to participate,” UnitedHealth President and Chief Executive Stephen Hemsley told analysts on its quarterly earnings call Thursday morning. The company beat expectations with net income of $1.41 billion in the second quarter.

UnitedHealth’s decision shows the company thinks the new Obamacare marketplaces are sustainable. “The size and response to the exchanges, the expected growth in it, and so forth plays into that thinking and recognition that this is going to be an established sector in the health-care benefits marketplace,” Hemsley said. “We have to choose to participate at some point in time and want to make sure that we don’t go in too late.”

UnitedHealth isn’t counting on the Affordable Care Act’s backstop for insurers, a set of mechanisms designed to lower the financial risk if insurers enroll a sicker population than they expected. Republicans like Florida Sen. Marco Rubio have derided the policies as a “bailout” for the insurance industry. “We believe public exchange markets must be sustainable on their own,” Hemsley said.

Despite the troubles launching healthcare.gov and some state marketplaces, enrollment has already reached 8 million and the Congressional Budget Office expects that number to reach 25 million in the next three years. Sitting on the sidelines for the first year may have seemed like prudence for UnitedHealth. Sitting out the coming years would be leaving money on the table.

    Before it's here, it's on the Bloomberg Terminal.