UnitedHealth Group's unit for health care services drove better-than-expected fourth-quarter earnings overall for the company, but the nation's largest health insurer on Tuesday also increased projected losses on new government-run health insurance exchanges.
Only a small fraction of the 42.3 million Americans covered by Minnetonka-based UnitedHealth Group buys insurance through the exchanges, which were launched under the federal Affordable Care Act.
Yet surprisingly high costs for those enrollees have generated $720 million worth of actual and expected losses for 2015 and 2016, the company reported Tuesday.
Overall, UnitedHealthcare's insurance business was still profitable during the fourth quarter, although less so than during the year-ago period, according to the financial results released Tuesday. Meanwhile, earnings were up 50 percent at the Optum services division, which provides everything from direct care to management of pharmacy benefits.
"We know the individual exchanges are top of mind to you," said Stephen Hemsley, the UnitedHealth Group chief executive, during a conference call with investors. "The balance of our total business — the well more than $175 billion of it — is thriving, considerably stronger and better positioned than this time last year."
UnitedHealth Group made headlines last year for saying it might pull out of the exchanges for 2017 because of unsustainable losses. Other large national insurers have reported losses, too, while expressing commitments to the new marketplaces.
Getting insurers to compete on the exchanges is key to the success of the health law, which requires almost all Americans to have health insurance and provides tax credits through the new exchanges as a way for uninsured people to get covered.
A lack of competition would mean fewer choices for shoppers, but also could boost prices and prompt the government to pump more subsidies into the market.
