U.S. health insurer Humana Inc. announced Wednesday that its profits fell significantly in the fourth quarter of 2015, largely due to rising unexpected costs associated with new customers who signed up for health care under President Barack Obama's Affordable Care Act. The company said that it is evaluating whether it will withdraw from the program in 2017.
The Kentucky-based insurance company, which is expected to be taken over by rival Aetna later this year, said that profits fell 30 percent in the fourth quarter of 2015. It reported a net income of $101 million in that quarter, down from $145 million the previous year, according to Forbes.
Much of the decline came due to a $176 million reserve that the company set aside for losses expected from new and costly customers enrolling in health insurance plans offered on Obamacare marketplaces.
"The benefit ratio associated with many of the company's individual commercial products, in particular ACA-compliant offerings, significantly exceeded its pricing expectations. The company continues to evaluate its participation in the individual commercial business for 2017," Humana said in its earnings statement.
"Similar to other companies' reported results across the sector, Humana's operating results for this business were challenged in (fiscal 2015) primarily due to unanticipated modifications in the program subsequent to the passing of the Affordable Care Act, resulting in higher covered population morbidity and the ensuing enrollment and claims issues causing volatility in claims experience."
Along with Humana, UnitedHealthcare, Aetna, Cigna and Anthem have also reported high loses. Premiums paid by Obamacare customers and government subsidies have apparently not been enough to offset the cost of an unexpectedly large number of sick patients, many who couldn't previously afford health care or lacked insurance due to pre-existing conditions, according to The Washington Examiner.
UnitedHealthcare, the country's largest insurer, said in November that it's considering dropping out of the marketplace in 2017. "We cannot sustain these losses," UnitedHealthcare CEO Stephen Hemsley said in an investor call, according to Maine's NPR News. "We can't really subsidize a marketplace that doesn't appear at the moment to be sustaining itself."
Aetna's chairman and CEO Mark Bertolini said earlier this month that he, too, has "serious concerns" about the long-term sustainability of the program.
"We continue to have serious concerns about the sustainability of the public exchanges," Chief Executive Officer Mark Bertolini said in a call regarding earnings, reported The Hill. "We remain concerned about the overall stability of the risk pool," he added, referring to sicker and more costly enrollees.
However, like Cigna, Bertolini said that Aetna doesn't plan on quitting and still views the program as a big opportunity for the company.
