Another U.S. health insurer is threatening to drop out of Obamacare after posting massive financial losses related to the program, just hours after an insurance CEO said the law’s markets were entering a “death spiral.”
Molina Healthcare Inc., one of the few big insurers that’s stuck with the exchanges created by the Affordable Care Act, said Wednesday that it could pull out of some markets next year after losing $110 million in 2016. Chief Executive Officer J. Mario Molina said he’s going to wait to see what President Donald Trump’s administration does to shore up the program.
“There are simply too many unknowns with the marketplace program to commit to our participation beyond 2017,” the CEO said during a conference call with investors after issuing fourth-quarter financial results.
Molina made the remarks at an especially vulnerable time for the Affordable Care Act, with Republicans and Trump threatened to repeal the law without providing a path on when it may happen and what could replace it. Earlier Wednesday, the administration released regulations it said were meant to stabilize the markets where coverage is sold to Americans under the law. Many large health insurers have left those markets, citing financial losses.
One of the biggest industry critics has been Aetna Inc. Earlier in the day, CEO Mark Bertolini said the markets were “in a death spiral,” predicting that more health insurers will quit in 2018, following Humana Inc.’s decision this week to exit entirely next year. Aetna cut its footprint to four states for this year, from 15, after losing about $450 million on sales of ACA plans last year. The company is mulling whether to further reduce its presence.
Bertolini’s assessment, though, has been disputed by health-care experts like Matthew Fiedler, a fellow with the Center for Health Policy at the Brookings Institution. Fiedler says the small decline in Obamacare enrollment in 2017 compared to 2016 was probably not driven by climbing premiums. Most individuals get subsidies, helping cushion the effect of rising costs.
Still, insurers have been hit financially.
Largely because of losses suffered in Obamacare, Molina posted an unexpected loss in the fourth quarter, of $1.54 a share excluding some items. Analysts anticipated a profit of 75 cents a share. The shares plunged in late trading, and were down 12 percent to $52.50 at 5:51 p.m. New York time, erasing their gains for the year to date.
“While we experienced strong enrollment growth across our business and have made progress on our cost cutting efforts, today’s results highlight the continuing challenges we face” in the Affordable Care Act markets, the company said in a statement.
The insurer was forced to pay $325 million more than expected into a “risk transfer” program that’s meant to stabilize the law’s insurance markets. Lower-than-expected medical costs helped offset some of those payments.