UnitedHealth Group has fired a warning shot 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 mature and 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 from large insurers is intended to put pressure on the government to do more to mitigate their 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, many 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 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.”