Unit­edHealth alone so far in threat­en­ing to exit ex­changes

Unit­edHealth Group expects to lose more than $600 mil­lion this year and next from its in­di­vid­ual health ex­change con­sumers.

Modern Healthcare - - NEWS - By Bob Her­man

Unit­edHealth Group fired a warn­ing shot last week at the Obama ad­min­is­tra­tion and state in­sur­ance of­fi­cials, suggest­ing it will quit the in­di­vid­ual mar­ket­places es­tab­lished by the Af­ford­able Care Act by 2017 if more healthy peo­ple don’t sign up and losses per­sist.

The prospect raises red flags about the progress made in nur­tur­ing the in­sur­ance ex­changes and their risk pools into stable mar­kets. But many be­lieve that even if Unit­edHealth does bail, it’s by no means cer­tain that other in­sur­ers—many of which have in­vested more time and en­ergy into the ex­changes—would im­me­di­ately fol­low.

And Unit­edHealth may not quit ei­ther. Some an­a­lysts say the pub­lic grip­ing is in­tended to put pres­sure on the gov­ern­ment to do more to mit­i­gate losses un­til the plans be­come prof­itable.

“They’re prob­a­bly try­ing to send a state­ment that th­ese losses are real, es­pe­cially since they are a (Wall) Street com­pany,” said Chris Althoff, a part­ner at health in­sur­ance con­sult­ing firm In­voyent.

Unit­edHealth expects to lose more than $600 mil­lion this year and next from its in­di­vid­ual ex­change con­sumers. While nine-fig­ure losses are in­tol­er­a­ble for any in­sur­ance com­pany, es­pe­cially if the makeup of the mar­ket­places doesn’t im­prove, Althoff said “there’s too much of a fu­ture in the con­sumer mar­kets” for Unit­edHealth to walk away. “They’d be re­miss if they did,” he said.

Right now, the ACA’s mar­ket­places rep­re­sent a small sliver of the big in­sur­ers’ rev­enue and mem­ber­ship, making an exit plau­si­ble. Unit­edHealth, which waited a year be­fore join­ing the ex­changes, has 550,000 mem­bers. That’s only 1.1% of the 46.1 mil­lion Unit­edHealth mem­ber­ship base and 5.5% of the 9.9 mil­lion ACA ex­change en­rollees across the coun­try.

If Unit­edHealth de­cided to pull the plug on its ex­change busi­ness, con­sumers in roughly three dozen states would lose their health plans. But the mar­ket­places wouldn’t die overnight, since there are many other com­peti­tors. Ob­servers would be more con­cerned if the pop­u­lar state Blue Cross and Blue Shield plans left en masse.

“Unit­edHealth is the leader in sev­eral mar­kets, but all those mar­kets would still have mul­ti­ple in­sur­ers vy­ing for en­roll­ment,” said Bill Melville, an an­a­lyst at health­care re­search firm De­ci­sion Re­sources Group.

In a bid to quell in­vestor fears,

Aetna, An­them and Cen­tene Corp. each reaf­firmed their prof­itabil­ity tar­gets for 2015 and said their in­di­vid­ual ex­change busi­nesses were per­form­ing in line with pro­jec­tions. Kaiser Per­ma­nente, the not-for-profit provider and in­sur­ance gi­ant based in Oak­land, Calif., has 450,000 ex­change en­rollees in eight states and the Dis­trict of Columbia. It too sig­naled that it has no in­ten­tion of ex­it­ing and that its ex­change oper­a­tions are “fi­nan­cially sus­tain­able.”

“We re­main strongly com­mit­ted to con­tin­u­ing to par­tic­i­pate in the health ex­changes,” Kaiser CEO Bernard Tyson said in a state­ment. “We see them as a pri­mary way we are meet­ing our mis­sion to pro­vide our high-qual­ity, af­ford­able care and cov­er­age to as many peo­ple as pos­si­ble.”

Few in­sur­ers ex­pected to make money on the ex­change plans in the first few years, said Joseph Mar­in­ucci, a health in­sur­ance an­a­lyst at Stan­dard & Poor’s. An­them, one of the largest pub­licly traded in­sur­ers on the ex­changes with 824,000 mem­bers, is one of the few that is in the black with its plans, but the com­pany has not out­lined spe­cific fig­ures. In­sur­ers have raised pre­mi­ums and out-of-pocket costs at a higher rate for 2016 based on more ro­bust data

col­lected by ac­tu­ar­ies to pre­dict med­i­cal costs.

Still, some in­sur­ers have al­ready pulled out of the ex­changes. Half of the ACA’s not-for-profit co-ops have shut­tered, forc­ing thou­sands of peo­ple with mar­ket­place plans to shop for new op­tions. Even some large in­sur­ers have called it quits. Blue Cross and Blue Shield of New Mex­ico, part of Health Care Ser­vice Corp., left its state ex­change for 2016 af­ter reg­u­la­tors re­jected its pre­mium hikes. As­sur­ant Health tried to sell its flail­ing in­di­vid­ual busi­ness, which has lost $389 mil­lion over the past 12 months, but it closed up shop this year when no buy­ers emerged.

Mar­in­ucci sees more re­trench­ment ahead. At the very least, com­pa­nies will re-eval­u­ate their po­si­tion in mar­ket­places that so far have at­tracted older pa­tients with more ex­pen­sive health con­di­tions. “This is the riski­est mar­ket you can con­duct busi­ness in,” he said. “It’s a de­vel­op­ing book of busi­ness.”

In­sur­ers that re­main pa­tient with the ex­changes are bank­ing on bet­ter en­roll­ment re­sult­ing from the ACA’s steeper tax penal­ties and bet­ter care co­or­di­na­tion as­so­ci­ated with value-based pay­ments.

“Some of those things that are fun­da­men­tal in the ACA are not hap­pen­ing fast enough,” Althoff said. “We’re still lin­ger­ing with an old model that’s built around fee-for-ser­vice.”

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