Insurance giant UnitedHealth Group on Tuesday seemingly took another step closer to bailing out of Obamacare in 2017 when its top corporate executive engaged in more public handwringing over financial losses and conceded strategic mistakes in rushing into the system.
While a pullout by UnitedHealth would deliver a serious blow to the future of President Obama’s signature health insurance law, a larger concern is whether its departure would trigger a stampede to the door by other bigger players in Obamacare, including Aetna and Anthem.
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“What United and other big insurers will do hinges in a big way on how much enrollment in the [American Care Act] marketplaces grows over the next couple years,” said Kaiser Family Foundation Senior Vice President Larry Levitt. “Increasing enrollment will keep insurers interested in the market, and will also bring in more healthy consumers, which will moderate premium increases.”
“However, if enrollment stagnates, I could see some other big, national insurers follow United’s pessimistic lead,” he added in an interview.
UnitedHealth shook up the market Nov. 19 by revealing that it was considering pulling out of Obamacare after suffering hundreds of millions of dollars in losses related to Affordable Care Act business.
In a mea culpa to investors meeting in New York today, UnitedHealth CEO Stephen Hemsley said that the company should have stayed out of the Affordable Care Act market a little longer than just the first year to better size up its profitability.
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“It was for us a bad decision,” Hemsley said, according to Bloomberg Business. “I take accountability for sitting out the exchange market in year one so we could in theory observe, learn and see how the market experience would develop. This was a prudent going-in position. In retrospect, we should have stayed out longer.”
The company gingerly entered the market last January after sitting out the first full year of Obamacare operations in 2014 to better gauge the potential profitability. The company revealed Nov. 19 that it was leaning towards pulling out after the coming year after a surprisingly poor performance this year providing individual policies in federal and state-run insurance markets.
Hemsley said that his company had kept costs down by selling plans with small doctor networks and pricing the plans competitively, according to Reuters. UnitedHealth generally enrolled consumers with better health than the overall exchange population but it still lost money, he said.
"We could not sustain the eroding level of losses on our exchange products," Hemsley said.
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UnitedHealth’s latest warning of a better than 50-50 chance that it will pull out is the latest serious blow to the Obamacare system. The administration’s Obamacare enrollment projections for the coming year are substantially down to 10 million, the projected cost of premiums and out-of-pocket costs are up, and nearly half of the insurance co-ops associated with the program are going out of business at the end of the year.
Moreover, there will be a sharp reduction of more than 40 percent in the number of health plans on HealthCare.gov known as PPOs – or preferred provider organizations – which offer enrollees greater flexibility in where they can get medical services covered by their insurer.
During his session with investors, Hemsley said it was too soon to say whether the exchange problems were limited to his company, of if they reflected a “structural issue” that may plague the other major insurers, including Aetna and Anthem.
Under the terms of the Affordable Care Act, insurance companies cannot deny coverage to anyone, including those with pre-existing health care problems. Hemsley said that many insurers have complained that some customers are making frequent use of their policies, which had contributed to losses.
"There likely won't be a single broadly accepted marketplace conclusion for some time," Hemsley said, while adding that other insurers were encountering similar problems to those of UnitedHealth.
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Although it is the largest health insurance provider in the country, UnitedHealth holds a relatively small part of the overall Obamacare market. According to The Los Angeles Times, United Health has sold health insurance plans to just 5.5 percent of the approximately 10 million Americans who use Obamacare to acquire coverage, and is offering plans in 34 states this year.
In the coming weeks, the administration and industry analysts will keep a close watch on other major insurers within the Obamacare network, including Aetna, Anthem (BlueCross Blue Shield), Cigna and Humana, all of which saw their stocks tumble following United Health’s announcement that it was considering withdrawing from the field.
“It’s still important to remember that while United is a very big insurer, they have never been a major player in the individual insurance market,” Levitt said. “The individual market has always been dominated by Blue Cross Blue Shield plans.”