What Unit­edHealth’s re­treat says about the ACA mar­ket­places

Modern Healthcare - - NEWS - By Bob Her­man

Unit­edHealth Group’s de­ci­sion to pull out of most of the Af­ford­able Care Act’s in­surance ex­changes cre­ated a big headache for the Obama ad­min­is­tra­tion, but the re­al­ity of the sit­u­a­tion is a lot more nu­anced than it might ap­pear.

Many ex­perts still be­lieve the in­surer’s self-in­duced ex­change flop doesn’t por­tend a broader cri­sis. How­ever, it’s clear the ex­changes have not sta­bi­lized as quickly as pre­dicted for in­sur­ers or con­sumers.

Pol­i­cy­mak­ers need to fig­ure out how to en­tice younger, health­ier peo­ple to buy cov­er­age and how to make the prod­ucts more ap­peal­ing and func­tional for con­sumers.

“I don’t think we’ll reach the death spi­ral of Oba­macare,” said Michael Mor­risey, a health pol­icy pro­fes­sor at Texas A&M Univer­sity, re­fer­ring to the the­ory in which mostly sick peo­ple buy health cov­er­age, thus forc­ing healthy peo­ple to drop their plans be­cause pre­mi­ums get hiked. “But there are clear is­sues of the claims ex­pe­ri­ence in the risk pool,” he said.

Unit­edHealth will exit at least 24 of the 34 states where it sells in­di­vid­ual ACA plans, Bloomberg re­ported. The Min­netonka, Minn.based in­surance and health ser­vices gi­ant, which barely made a foot­print in the ex­changes in the in­au­gu­ral year and is still a highly prof­itable com­pany, es­ti­mated its losses on in­di­vid­ual ACA plans will sur­pass $1 bil­lion for 2015 and 2016.

“We will re­main in only a hand­ful of states, and we will not carry fi­nan­cial ex­po­sure from ex­changes into 2017,” Unit­edHealth CEO Stephen Hem­s­ley told in­vestors.

Na­tion­ally, Unit­edHealth’s ex­its won’t cause the ACA to im­plode. A Kaiser Fam­ily Foun­da­tion anal­y­sis found wide- spread Unit­edHealth de­par­tures will have only a “mod­est” im­pact on com­pe­ti­tion and pre­mi­ums, though more so in ru­ral ar­eas. The com­pany, which has al­most 800,000 ACA mem­bers, or 6% of the ex­change pop­u­la­tion, has not been par­tic­u­larly com­pet­i­tive on price, which is a lead­ing met­ric for ex­change shop­pers.

Few be­lieve other large in­sur­ers will fol­low Unit­edHealth. Yet the ex­its raise an im­por­tant ques­tion: How much longer can in­sur­ers tol­er­ate red ink?

“Every­body’s los­ing their shirt,” said Robert Laszewski, a health pol­icy an­a­lyst and critic of the ACA. “It’s not just United.”

In­deed, mul­ti­ple in­sur­ers across the country have hem­or­rhaged money in the new in­di­vid­ual mar­ket­places, in­clud­ing most of the ACA’s co-ops and many of the Blues car­ri­ers. Blue Cross and Blue Shield of Alabama, by far the largest in­surer in the state, lost $170 mil­lion on the ACA ex­changes in 2015. The in­surer would have been prof­itable had it not been for heavy in­di­vid­ual-mar­ket losses.

Health Care Ser­vice Corp., the Chicago-based par­ent com­pany of Blue Cross and Blue Shield plans in Illi­nois, Texas and three other states, cu­mu­la­tively lost more than $2 bil­lion in 2014 and 2015— roughly dou­ble Unit­edHealth’s ACA losses. HCSC has re­placed many of its broad provider net­works with nar­rower HMO plans to con­trol costs.

Deficits have mounted as many peo­ple with costly health con­di­tions raced to sign up for cov­er­age, re­sult­ing in what health econ­o­mists say is early ev­i­dence of ad­verse se­lec­tion. But it’s also ev­i­dence the ACA is ad­dress­ing a prob­lem it ex­plic­itly sought to re­verse. Those en­rollees had been de­nied cov­er­age or found it un­af­ford­able for many years be­cause of their poor health.

The ACA has un­doubt­edly helped the poor­est, sick­est and most vul­ner­a­ble citizens ac­cess health in­surance, bring­ing the na­tional unin­sured rate to a his­toric low. More than two-thirds (68%) of the 9.6 mil­lion peo­ple who chose a 2016 health plan through the fed­eral Health­Care.gov ex­change could have se­lected a plan with a monthly pre­mium of $75 or less when fac­tor­ing in sub­si­dies, ac­cord­ing to HHS data. Peo­ple who make up to 400% of the fed­eral poverty level are el­i­gi­ble to re­ceive sub-

si­dies as tax cred­its.

Peo­ple who earn be­tween 100% and 250% of the fed­eral poverty level and se­lect a sil­ver plan also are el­i­gi­ble for cost-shar­ing sub­si­dies that lower their co­pays and de­ductibles. That cov­er­age, along with Med­i­caid ex­pan­sion, has pro­tected low-in­come peo­ple from loads of po­ten­tially ru­inous med­i­cal debt.

But even a pre­mium of $75 a month could strain the pock­et­books of those liv­ing on the edge of poverty. And mid­dle-class peo­ple earn­ing 400% of poverty—$47,520 for one per­son or $97,200 for a fam­ily of four—must shoul­der the en­tire cost of cov­er­age on their own or pay the law’s tax penalty. Many have cho­sen the lat­ter.

The Kaiser Fam­ily Foun­da­tion’s mar­ket­place cal­cu­la­tor shows a fam­ily of four with a house­hold in­come at 400% of poverty will pay an av­er­age of $863 a month this year for a sil­ver plan, all with­out any fed­eral as­sis­tance. De­pend­ing on where peo­ple live and how much pre­mium rates go up for 2017, bro­kers and an­a­lysts pre­dict fam- ilies with un­sub­si­dized cov­er­age could eas­ily be pay­ing more than $1,000 a month, in ad­di­tion to man­ag­ing high de­ductibles and nar­row net­works.

“If Oba­macare is charg­ing $1,200 a month for a stan­dard (fam­ily) sil­ver plan, this is a huge fail­ure,” Laszewski said. “Peo­ple can’t af­ford that.”

Th­ese prob­lems, he added, would ex­ist re­gard­less of what Unit­edHealth de­cided to do.

Peo­ple ages 18 to 34, who are less costly to in­sure be­cause they gen­er­ally need less health­care, make up 28% of ACA en­rollees. Most ob­servers be­lieve that num­ber needs to be around 40% for truly stable pre­mi­ums.

“You have to have the healthy pop­u­la­tion to off­set the sick pop­u­la­tion,” said Dan How­ell, a part­ner at In­voyent, a con­sult­ing firm that works with health plans.

Unit­edHealth’s an­nounce­ment that it will bow out of many ex­changes has cre­ated consumer con­cern in some mar­kets, but sev­eral quickly af­firmed their com­mit­ment.

Se­cu­rity Health Plan, a providerowned plan in Wis­con­sin, has 30,000 ACA en­rollees, mak­ing it one of the largest ex­change plans in the state. John Kelly, Se­cu­rity’s chief mark­ing and oper­a­tions of­fi­cer, said Se­cu­rity re­cently fielded calls from peo­ple won­der­ing if the in­surer would fol­low Unit­edHealth’s lead. It won’t.

“We are plan­ning to stay in it for the long haul,” Kelly said. “We’ve been re­in­forc­ing to peo­ple, we are stay­ing in the mar­ket.”

De­pend­ing on where peo­ple live and how much pre­mium rates go up for 2017, bro­kers and an­a­lysts pre­dict fam­i­lies with un­sub­si­dized cov­er­age could be eas­ily be pay­ing more than $1,000 a month, in ad­di­tion to man­ag­ing high de­ductibles and nar­row net­works.

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