Two days ago, our DCG posted on insurers, including UnitedHealth, warning that the Affordable Care Act, better and more properly known as ObamaCare, is unsustainable and that Americans should expect our health insurance premiums to increase again, never mind that Obama had promised that our premiums would actually decrease with ObamaCare.
Today, going beyond mere warning, America’s largest insurance company UnitedHealth announced that, due to massive financial losses from participating in the ironically-named Affordable Care Act (ACA), it is withdrawing from ObamaCare and will cut its participation in ObamaCare insurance exchanges to just a handful of states next year.
FoxNews reports that UnitedHealth CEO Stephen Hemsley announced that the company “cannot continue to broadly serve the market created by the Affordable Care Act’s coverage expansion” because of:
- The higher risk that comes with ACA or ObamaCare’s customers, which results in
- Massive financial losses for UnitedHealth of more than $1 billion for this year and last: $475 million in 2015, and $650 million expected in 2016.
Hemsley said his company does not want to take the financial risk from the ObamaCare exchanges into 2017, and that UnitedHealth has already decided to pull out of Arkansas, Georgia and Michigan in 2017.
The state-based exchanges are a key element behind the ACA’s push to expand insurance coverage. But insurers have struggled with higher-than-expected claims from ObamaCare exchanges because many ObamaCare customers nationwide are higher-risk, which is confirmed by a recent Blue Cross Blue Shield Association. The study found new enrollees in individual health plans in 2014 and 2015 had higher rates of hypertension, diabetes, depression, coronary artery disease, HIV and Hepatitis C than those enrolled before ObamaCare.
Insurers say they are struggling, in particular, with customers who signed up for coverage outside regular enrollment windows and then dumped expensive claims on their books, a problem the Obama administration has said it would address.
UnitedHealth had moved slowly into the newly created ObamaCare market by participating in only four exchanges in the first year, 2014. In 2015, the company expanded to two dozen exchanges. UnitedHealth currently participates in exchanges in 34 states and covers 795,000 people.
The Kaiser Family Foundation, in an analysis on the prospect of UnitedHealth’s exit, said “the effect on insurer competition could be significant in some markets – particularly in rural areas and southern states” if it is not replaced. In the most extreme scenario, “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.”
A dozen nonprofit health insurance cooperatives created by the ACA to sell coverage on the exchanges have already folded, and the survivors all lost millions last year. Publicly traded insurers, like Aetna, have lost money as well. But some companies, like Molina Healthcare, said they have managed to turn a profit from the exchanges.
Analysts expect other insurers to join UnitedHealth by also trimming their exchange participation in 2017, especially if they continue to struggle with high costs.
~Eowyn