When UnitedHealth Group, the company that owns major insurer UnitedHealthcare, said Thursday it was considering pulling out of Affordable Care Act exchanges in 2017, it cited "a continuing deterioration in individual exchange-compliant product performance" and a loss of $425 million from plans it had sold through those health insurance marketplaces. “We cannot sustain these losses,” CEO Stephen Hemsley said on an investor call.
Since the warning emerged, much attention has focused upon the challenges posed by an ever fluctuating healthcare landscape and the flaws of the Affordable Care Act. Yet in 2014, Hemsley took home more than $66 million in total compensation, and pay for healthcare executives has steadily risen in recent years even as experts have suggested that such pay hurts both insurers and customers.
The $66 million that Hemsley made in 2014 included $45.5 million in exercised stock options. His actual salary of $1.3 million was minimal by comparison. Analysts have said that payment in equity rather than cash can lead to short-term thinking for executives, such as a focus on how to boost share prices.
In April, an analysis of healthcare executive pay and healthcare company profits conducted by Modern Healthcare found that in 2014, compensation for some of the highest-paid CEOs grew faster than the profits of the companies they oversaw.
"The company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017," UnitedHealth Group said in a press release Thursday. It said the company remained "a strong supporter of sustainable efforts to ensure access to affordable, quality care for all Americans," even as it projected losses for 2015 and 2016 from plans sold on the Affordable Care Act exchanges and Hemsley saw no signs of that forecast improving.
Initially, UnitedHealthcare had been reluctant to enter the online health insurance marketplace, holding out in the first year of the exchanges, 2014, before joining in 2015. This year, about 550,000 people have bought health insurance from UnitedHealthcare on Affordable Care Act exchanges, according to industry publication Modern Healthcare. By comparison, 824,000 people bought plans from Anthem, 815,000 through Aetna and 610,000 through Humana.
This year has been a bumpy one for the Affordable Care Act. Although it survived a challenge in the Supreme Court intact, more than half of the co-ops created with financing under the law have announced that they would close by 2016. Many of them were forced in October to fold, after the federal government announced it would pay out just 12.6 cents on the dollar from a federal fund aimed at mitigating the very losses that posed some of the biggest fiscal challenges to these co-ops.
Other insurers selling plans on the exchanges have posted losses too. Blue Cross Blue Shield said it lost $282 million in 2014 due to these plans, while Aetna and Anthem have said they have faced troubles, though they have yet to publicly threaten to abandon the marketplaces. One reason insurers have faced losses is because those who have bought insurance during the exchanges' infancies tend to be sicker and thus more expensive.
UnitedHealth has also pointed to other factors that could result in losses, like fewer enrollees than expected. It noted in its 2014 annual report that "Health Reform Legislation’s full impact remains difficult to predict and could adversely affect us."