By Peter Sullivan - 04-19-16 09:30 AM EDT
The insurer UnitedHealth is pulling out of the ObamaCare marketplaces in all but a "handful" of states in 2017, the company announced Tuesday.
The announcement, made by CEO Stephen Hemsley on an earnings call, follows up on the company's statement in November that it was considering dropping out of ObamaCare due to financial losse
The moves by UnitedHealth, the nation's largest health insurer, have drawn attention for what they could indicate about the sustainability of ObamaCare as a whole.
The Obama administration has downplayed the importance of UnitedHealth, saying the insurer is a fairly small player in the marketplaces, with about 6 percent of all enrollees. The insurer's coverage was often not priced competitively, officials have said.
But UnitedHealth is not alone in warning that the financial losses in the ObamaCare marketplaces are reaching dangerous levels.
Other insurers that play a bigger role in the marketplaces, including some Blue Cross Blue Shield plans, have also raised the prospect of pulling back some of their ObamaCare plans.
Insurance companies are expected to seek significant premium increases next year to stem their losses. In the past, the impact on consumers has been blunted by ObamaCare's tax credits.
States will have the power to accept or reject the premium increases.
Republicans have long warned that ObamaCare would "collapse under its own weight," and they seized on the UnitedHealth news to press their case.
"This isn't about spreadsheets and quarterly reports - it's about the President's broken promise that families would have more choices under ObamaCare," Sen. Ben Sasse (R-Neb.) said in a statement Tuesday.
"This year, in 36 percent of the nation's counties, families could pick between only one or two insurers on the exchange and, given today's news, next year looks like it could be even worse."
The administration, meanwhile, said it expects that insurers will both come and go as the new insurance markets set up by the Affordable Care Act develop. But overall, they say the law is working as planned.
"The Marketplace is a reliable source of coverage for millions of Americans with a robust number of plan choices," Department of Health and Human Services spokesman Ben Wakana said in a statement. "We have full confidence, based on data, that the Marketplaces will continue to thrive for years ahead."
A Kaiser Family Foundation study on Monday found that if UnitedHealth pulled out of all 34 states in which it participated in 2016, the number of choices for consumers would decline. The percentage of U.S. counties with only one or two insurers to choose from would grow from 36 percent to 53 percent, the study found.
But premiums would not be affected greatly because UnitedHealth often does not offer one of the cheapest plans, according to the study.
It remains unclear in what states UnitedHealth will continue to offer ObamaCare coverage, though it appears that the company will be leaving most of the 34 states where it now participates.
Caroline Pearson, senior vice president at Avalere Health, a consulting firm, said that premium increases for insurers to halt their losses next year are likely but that it would be a healthy move that would allow insurers to stop losing money.
"I don't think it should be especially worrying," she said of UnitedHealth's decision. "But I do think it speaks to some of the very real challenges that plans are experiencing."
"I'm certainly not expecting a lot of other plans to drop out," she said, noting that UnitedHealth is different than other insurers because it entered the ObamaCare market late looking for a "growth opportunity."
The ObamaCare market has been smaller and costlier than expected, partly due to the number of sicker enrollees.
"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, the UnitedHealth CEO, said on the earnings call in explaining the company's move.
- This story was updated at 2:02 p.m.