Affordable Care Act Weighs On Insurers

The Affordable Care Act has faced a tough road since its inception in 2010. Republicans have vehemently opposed the bill ever since President Barack Obama proposed it and over time the argument against the new system has continued.

Now, insurers are beginning to push back against the healthcare exchange too as it has begun to eat into their profit margins and upset their forward momentum.

UnitedHealth Sees Losses

UnitedHealth Group UNH said it had increased its forecast losses on 2016 Affordable Care Act plans, saying it is expecting to lose out on over $500 million compared to previous projections of between $400 and $425 million. The insurer said it took steps to reduce the number of enrollees this year by cutting insurance agents' commissions for selling ACA plans and pulling back on its marketing efforts, but those efforts did little to mitigate losses, as Wall Street Journal noted.

Humana In Similar Position

Earlier this month, Humana Inc. HUM reported similar troubles, saying that it would have to set aside funds to counter balance forecast losses on its own 2016 ACA plans. While Humana has yet to tally up an exact dollar amount, the firm echoed UnitedHealth's concerns that Obamacare was significantly eating into profits.

Abandon Affordable Care?

In 2015, UnitedHealth warned that it was planning to abandon its ACA plans in 2017 if the exchange wasn't reformed in the coming year. The company had already offered 2016 plans, but depending on how the year progresses, Chief Executive Stephen J Hemsley said the company may be forced to withdraw its participation in future years. The company said that the exchange's current rules allow people to wait until they have an upcoming medical expense to sign up, something that has been costly to insurers.

As they are, ACA plans cut down on insurers' ability to subsidize expensive plans for the sick and elderly with the premiums paid by young, healthy individuals with relatively low healthcare costs.

A Change Is Coming

Recognizing that insurers abandoning the exchange could spell the end for Obamacare, the government has already begun to address this issue. Federal officials are working to improved the enrollment requirements in order to close loopholes and make it harder for people to sign up once they have a medical cost.