UnitedHealth first warned in November that it would was considering exiting Obamacare marketplaces in 2017. That report analyzed the effect if United were to drop out of all the exchanges where it participates, and found that 1.1 million people enrolled through the exchanges would have one insurer left to choose from if it withdrew from every market and no other insurers rushed in to fill the gap. An average health plan used as a benchmark would be about 1 percent more expensive if United had not participated in 2016.
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The effect of the company’s withdrawal on consumers depends on where they live.
The company, which is the largest US health insurer, has about 795,000 customers who bought plans for 2016 through the exchanges, which were created under the Affordable Care Act.
Health insurer UnitedHealth Group Inc reported a better-than-expected quarterly revenue helped by strength in its Optum business which offers healthcare services and drug benefit plans.
Minnetonka-based UnitedHealth said it also steepened its projected loss on the 2016 exchange business to $650 million from around $525 million, amid signs that new enrollees’ health status appeared worse. The company has previously said it lost $720 million on those exchanges in 2015.
In a bid to discourage sales of ACA plans, UnitedHealth in January stopped paying sales commissions to independent agents who sold the individual coverage.
UnitedHealth, which serves 70 million Americans, already planned to withdraw from marketplaces in Arkansas, Michigan and portions of Georgia next year.
Aetna CEO Mark Bertolini said in February, “We continue to have serious concerns about the sustainability of the public exchanges”, pointing in particular to the risk pool skewed toward those who use the most healthcare.
UnitedHealth moved slowly into this newly created market by participating in only 4 exchanges in their first year, 2014. UnitedHealth’s medical care cost ratio – the proportion of revenue spent on providing health services – in the quarter increased 30 basis points over a year ago to 81.7%, reflecting an extra calendar day of service in the quarter, the company said.
A Kaiser Family Foundation study this month said the company’s exit nationally would only have a modest impact. During the same period past year, UnitedHealth Group saw net earnings of $1.41 billion on $35.8 billion in revenue.
Several observers said that while the decision is a clear signal of the troubles insurers face in making money in the marketplaces, it doesn’t mean that other companies will follow suit.
The ObamaCare exchanges are driving health insurers deeply into the red, and unless insurers are allowed to raise premiums significantly this year, they may well bid the exchanges farewell, companies and analysts alike are warning – and Democrats, in an election year, are fearing.
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The insurer has always been a tentative participant in ObamaCare, shying away from offering coverage under the massive health care plan at first and then working its way in gradually during its first couple of years.
