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April 19 2016

UnitedHealth Drops ObamCare: Is This the Death Knell?

Patrice J. Lee

ObamaCare is back in the headlines. Healthcare giant UnitedHealth is making good on its promise from last fall to pull out of ObamaCare in 2017.

Today, UnitedHealth’s head announced on a quarterly call that the company would exit most of the 34 states where they offered un-Affordable Care Act insurance exchange plans. Addressing investors, the company’s CEO pessimistically noted: “The smaller overall market size and shorter term, higher risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustainable basis,” he said. He did not indicate which states UnitedHealth planned to exit, but other reports point to Arkansas, Michigan, Connecticut, and part of Georgia.

While UnitedHealth’s financial health is improving from last year, it estimates that its losses from the exchanges would be $650 million this year.

The company leadership warned last fall that the losses were because of imbalances of healthy to sick and younger to older patients and would likely drive them out of the ObamaCare business. It was assumed that other insurers such as Aetna, which insures even more ObamaCare customers, were probably suffering worse losses, but in silence.

The Administration which was probably given the heads-up just prior to the media was quick to put a positive spin on the news and to calm fears according to the Washington Post:

"We have full confidence, based on data that the marketplace will continue to thrive for years ahead," Health and Human Services spokesman Ben Wakana said in a statement Monday. "The number of insurers per state has grown year over year. The marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer."

At least the Administration hopes this will not trigger a mass exodus. Some health experts doubt that UnitedHealth’s announcement will have a major impact (right away) on the ObamaCare marketplace. News analysis from Kaiser Family Foundation finds that the impact will vary per state:

If United were to exit from all areas where it currently participates and not be replaced by a new entrant, the effect on insurer competition could be significant in some markets – particularly in rural areas and southern states...  If United were to leave the exchange market overall, 1.8 million Marketplace enrollees would be left with two insurers, and another 1.1 million would be left with one insurer as a result of the withdrawal.

United does not generally offer low premium plans in the Marketplaces. It has the lowest or second-lowest silver plan in 35% of counties (647) where it participates in 2016, representing an estimated 16% of marketplace enrollees overall.  Even when it did price relatively low, it was often not significantly lower than its nearest competitors.  As a result, the effect of a United withdrawal nationally would be modest.

Others suggest that while UnitedHealth exposes an industry problem, because only a small portion of their revenue comes from the ObamaCare marketplaces, it’s easier for them to leave compared with Aetna or Anthem for example.

Health insurers which opted into the ObamaCare system on the promise of a tidal wave of new patients got new patients--just not the ones they needed. As a Blue Cross Blue Shield analysis recently found, ObamaCare attracted patients with higher rates of disease such as hypertension, diabetes, depression, HIV, coronary artery disease, and Hepatitis C. They required significantly more medical services from impatient hospital admission, outpatient visits, prescriptions, and emergency room visits. That resulted in higher costs that they’ve passed along to customers in higher premium costs, higher deductibles, and other out-of-pocket costs.

How embarrassing for President Obama that his signature healthcare law, which he campaigned on and fought to make his crowning legacy, would unravel just as he prepares to leaves office. Unfortunately, we are left with the mess.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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