Insurers' stocks rebound after UnitedHealth's Obamacare letdown
Several major insurers Friday suggested that their profits are on track, fueling a rebound in health care stocks a day after the abrupt reversal of fortunes at the nation's largest insurer focused scrutiny on a key pillar of Obamacare.
UnitedHealth Group's (UNH) threat on Thursday to stop offering insurance through the public exchanges amid steep losses came just a month after the company expressed optimism about its Affordable Care Act exchange offerings.
The company's about-face — which could force more than a half-million consumers to find new health care plans after 2016 — sparked a re-examination of the prospects of other insurance giants.
UnitedHealth warns it may exit Obamacare plans
But several cautiously optimistic statements by insurers fueled a rally in health care stocks Friday, a day after UnitedHealth's remarks prompted a sharp decline in insurance industry shares.
The iShares U.S. Healthcare Providers ETF (IHF) rose 2.4% Friday after plunging 4.2% Thursday, and the SPDR S&P Health Care Services ETF (XHS) rose 2.1%. Meanwhile, UnitedHealth's shares closed up 2.1% after losing 5.6% Thursday.
Mario Molina, CEO of insurer Molina Healthcare, whose stock tumbled 11% on Thursday after the UnitedHealth revelation and then regained 6.3% Friday, told USA TODAY in an interview that he found the UnitedHealth fallout "a little puzzling."
Molina has about 225,000 customers in Obamacare exchange plans.
"And that has been a profitable line of business for us, although it is a small part of our business," he said. "I can’t really explain why they’re having difficulty. I just know that it’s been a good product for us so far."
In a Securities and Exchange Commission filing Friday, insurance giant Aetna (AET) confirmed that it expects to meet its full-year operating earnings targets, suggesting that the company is not absorbing the kinds of losses that UnitedHealth blamed for its reconsideration of Obamacare.
To be sure, however, Aetna had already announced plans to withdraw from several state exchanges in 2016. And Aetna Chief Financial Officer Shawn Guertin told investors last week that the company's Obamacare plans were unprofitable in 2015.
But Guertin said Aetna is raising rates in the low-double-digit-percentage range on Obamacare plans in 2016 to improve the company's financial performance. "We can make inroads into this business in 2016," he said.
An Aetna spokesperson told USA TODAY on Friday that the CFO's remarks remain representative of the company's outlook.
Aetna shares, which had fallen 7% Thursday, closed up 4.6% Friday at $104.43.
Like UnitedHealth, Aetna's Guertin also raised concerns about a trend of consumers using the "special enrollment" period allowed by Obamacare to buy insurance outside of open enrollment periods and then drop coverage after they've received certain procedures.
The insurers blamed that nuance for draining profits — because they must pay the costs of care without reaping premiums when patients are healthy.
"The degree to which we’re seeing that is far more elevated this year," Guertin said. "That’s certainly one of the things that we’ve spent a lot of time looking at and needs to be thought through about this program going forward."
Molina told USA TODAY that his company is "watching that very carefully" but hasn't yet noticed a problem.
Still others gave no indication of trouble:
• Insurance giant Centene (CNC) confirmed that its earnings performance is on target. The company said Thursday in an SEC filing that its Obamacare strategy "continues to perform in line with expectations." Centene shares fell about 6% on Thursday but regained most of those losses Friday, rising 5.4%.
• Anthem (ANTM), a major for-profit provider of Blue Cross Blue Shield plans, said in an SEC filing that it expects to meet its profit goals for the year, though it did not discuss the performance of its Obamacare plans during the crucial open enrollment period, which began Nov. 1. Shares of Anthem closed up 2.7% after falling 7% Thursday.
• Privately held Kaiser Permanente told USA TODAY that it won't abandon the ACA exchanges.
"At Kaiser Permanente, we remain strongly committed to continuing to participate in the health exchanges," CEO Bernard Tyson said Thursday in an emailed statement. "While there have been challenges at times, we believe at the end of the day they are causing healthy disruption, and are forcing the health care industry to respond better to consumer needs."
The Affordable Care Act established public exchanges allowing individuals to shop for insurance through federal and state websites. Insurers' participation is optional.
Sparking the turmoil Thursday, UnitedHealth warned that it might stop offering plans through the exchanges after 2016. The company lowered its earnings forecast by $425 million — representing a worsened outlook for ACA plans in the fourth quarter of 2015 and all of 2016 — a month after publicly expressing optimism about Obamacare's prospects.
UnitedHealth CEO Stephen Hemsley told investors that a "deteriorating experience" prompted the company to halt marketing on 2016 plans, which the insurer has already legally committed to offer. U
U.S. Department of Health & Human Services press secretary Ben Wakana said in an email that a "statement by one issuer is not indicative of the marketplace’s strength and viability."
"People looking for coverage in the Marketplace continue to have a robust number of plan choices and as the data shows the marketplace is stable, vibrant and a growing source of coverage for new consumers," Wakana said.
USA TODAY reporter Jayne O'Donnell contributed to this story.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.