What: Health insurance stocks got taken to the collective woodshed today after industry giant UnitedHealth Group (NYSE:UNH) warned that its individual exchange-compliant products are not performing as expected.

So what: UnitedHealth Group provided its investors with updated earnings guidance for 2015 today, noting that the company is experiencing earnings pressure from larger than expected loses on its individual exchange-compliant products, which it introduced after the Affordable Care Act -- also know as Obamacare -- became law of the land. The company now expects to show earnings of $6.00 per share for 2015, which accounts for a $425 million reduction in fourth quarter earnings from prior guidance.

The company noted that it has scaled back its marketing efforts for individual exchange products and that it is currently debating whether it should discontinuing offering them. It plans to release updated plans in 2016.

This release appears to have left investors in the entire space spooked. Larger companies like Anthem (NYSE:ANTM) saw their shares fell by more than 6% today, while smaller niche companies like Molina Healthcare (NYSE:MOH) faired far worse. Molina's shares dropped by more than 11% in afternoon trading.

Now what: In the release, Stephen Hemsley, CEO of UnitedHealth Group stated:

"In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step."

If UnitedHealth Group was to stop offering exchanges it would deal quite the blow to Obamacare, as more than 540,000 patients are currently getting insurance through UnitedHealth's exchange offerings.

This news also follows Anthem's announcement last month that it too was planning on scaling back its exchange offerings, as it experienced slower-than-expected enrollment and pricing issues. It appears that patients who are signing up for the exchanges plans are using them more than expected, which is pressuring profits. 

It's no wonder than the big players like Anthem are fairing much better today than the niche players like Molina Healthcare. Molina Healthcare has been riding high since the Affordable Care Act was passed, as it has since grown rapidly through its Medicaid-related offering. Investors are bracing themselves for the worst here and are selling its shares off hard.

It's still too early to know what this news means for the future of insurers who provide individual coverage through exchanges, but investors in the space would be probably be wise to continue following this story to see how everything plays out. 

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