Apr 20, 2016

The Effects of UnitedHealth’s Exchange Withdrawals: Fewer Choices and Higher Premiums

Post by Derek Yale

Yesterday, UnitedHealth Group Inc. announced its plan to pull out of most of the 34 states where it currently offers health care plans on Affordable Care Act insurance exchanges.

According to The New York Times, “the UnitedHealth Group, one of the nation’s largest health insurers, told investors on Tuesday that it continued to lose hundreds of millions of dollars selling individual policies under the federal health care law. The company said it planned to pull out of the majority of states where it offered coverage and would offer policies on the public exchanges in ‘only a handful of states’ for 2017.”

The withdrawals are a sign of what is to come as many other large insurers echo UnitedHealth’s doubts about the exchanges. “This business remained unprofitable in 2015 and we continue to have serious concerns about the sustainability of the public exchanges,” said Aetna chief executive Mark Bertolini.

Insurers are right to be concerned. Stringent regulations on insurance companies in the exchanges along with sicker-than-expected enrollees have led to an unsustainable marketplace in which premiums are skyrocketing, deductibles are increasing, and insurance companies are bleeding profits.

This is all bad news for Americans struggling to find affordable health care in the exchanges. The government-run exchanges rely on the participation of insurance companies to operate, and the more insurance companies that pull out of the exchanges, the more conditions will deteriorate, leaving consumers with fewer choices and higher costs.

A new study from the Kaiser Foundation looked specifically at the effect UnitedHealth’s withdrawal will have on prices and choices. The study found the company’s withdrawal will increase average benchmark premiums and leave over 5 million Americans to choose from just one or two insurers on their state exchanges.

The Kaiser Foundation wrote, “If United exits everywhere (again, with the exception of Harken Health in Georgia), the number of Marketplace enrollees with access to only one or two exchange insurers would increase (from 1.9 million to 3.8 million or from 15% to 30% of all enrollees), and the number of enrollees with only one insurer would also increase (from 303 thousand to 1.4 million or from 2% to 11% of all enrollees).

Fewer choices and less competition mean higher health care costs. According to Kaiser, the weighted average benchmark premium would have been about 1 percent higher had United not participated in the 2016 Affordable Care Act exchanges.

States like Georgia, Alabama, North Carolina and Tennessee where United holds a large market share would be hit particularly hard as “as these states would see appreciable drops in insurer participation and sizable changes in benchmark premiums in a number of counties if United were not participating.”

As conditions in the exchanges continue to deteriorate, Americans are realizing that government-run health care is leaving them with fewer choices and higher costs. It’s time to reverse course on this reckless experiment before more people are harmed.