If you like your insurance carrier, you can keep your insurance carrier. The nation’s largest provider of health insurance announced this morning that it may choose to stop offering individual coverage after 2016, and will “pull back on its marketing efforts” immediately in this market. If the losses continue and United pulls out of next year’s exchanges, it will set up a very bad moment for ObamaCare — and for Democrats just weeks before the election:
UnitedHealth Group (NYSE: UNH) today reported revised expectations for 2015, reflecting a continuing deterioration in individual exchange-compliant product performance, and provided an initial outlook for 2016.
“In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step,” said Stephen J. Hemsley, chief executive officer of UnitedHealth Group. “We continue to be pleased with the growth and overall performance of our Company outside of the individual exchange products and look forward to strong, positive and broad based earnings growth across our enterprise in 2016.” …
UnitedHealthcare has pulled back on its marketing efforts for individual exchange products in 2016. The Company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.
Don’t kid yourselves. If United is going to “pull back” on marketing efforts for 2016, it’s because they don’t see themselves being in the market in 2017. Just by announcing it, United has set up the expectation of withdrawal for investors, who do not want to have good money chasing after bad.
Assuming nothing changes in the fiscal model — and after three years, it’s not likely to suddenly improve — that would create a huge gap in choice for many Americans in the next open enrollment period. That would normally begin in October 2016, unless HHS decides to delay it, as they did ahead of the 2014 elections. Many voters will suddenly find their coverage expired, forced to choose another plan from a smaller list of options, all of which will no doubt become even more expensive for everyone thanks to the decline in competition. It’s going to act like a bombshell on the election, especially for Democrats running to hold seats in Congress, and perhaps even in the presidential election.
Philip Klein explains why prices will move even higher than usual:
The year 2017 is significant for insurers, because that’s the year when several programs designed to mitigate risk for insurers through federal backstops go away. The hope was that those programs would act as training wheels for Obamacare in its first few years of implementation, but after that, the insurers were supposed to be able to thrive on their own. UnitedHealth’s statement suggests otherwise.
If UnitedHealth and other insurers decide to exit, remaining insurers will be forced to take on even more high-risk enrollees, prompting them to either raise rates further or exit themselves. That in turn would deprive individuals of choices and remove competition, a key purpose of the exchanges.
Klein sat in on a United conference call this morning, and got the scope of the losses:
UnitedHealth expects to lose over $200 million on Obamacare in 2016 alone
— Philip Klein (@philipaklein) November 19, 2015
So don’t expect United to suddenly see a reason to get back into the 2017 market, not without hefty risk-corridor subsidies — which under any other circumstances would be called “corporate welfare.” Given that Congress isn’t likely to reverse course and underwrite ObamaCare losses, the path to the exit remains the likely course for United, and perhaps some of its competitors, too.
United says it will remain committed to its Medicaid and Medicare businesses, and of course it will stick with its employer-based group coverage, where the issues of ObamaCare regulation have less impact. But this is a reversal for United on the individual markets, as Forbes’ Bruce Japsen points out. Just last month, United’s CEO declared that they still considered this a growth market:
Just last month, UnitedHealth president and chief financial officer David Wichmann touted growth for the individual commercial business, saying “we continue to expect exchanges to develop and mature over time into a strong viable growth market for us.”
But UnitedHealth and other insurers need more Americans to come into the public exchanges because the patients that are signing up for coverage are sicker, making a “higher overall risk pool,” insurance executives say. It’s a key reason many Americans are seeing rate increases of 10 percent or more across the country on public exchanges.
United has discovered that the trade-offs in mandates and forced coverage don’t pay off. It’s a bait-and-switch for insurers by the Obama administration, but it’s even worse of a bait-and-switch for consumers. In my column today for The Fiscal Times, I argue that the financial model of ObamaCare has left consumers with a fistful of broken promises, and the worst of both worlds:
Now, as The New York Times reported this weekend, even the words “affordable” and “care” have turned out to be untrue as well. The sharp rise in premiums has garnered the most headlines in the first three open-enrollment seasons of Obamacare, but equally if not more pernicious has been the increase in deductibles. As Eric Pianin explained for The Fiscal Times on Monday, deductibles have increased an average of 11 percent on Bronze level plans for 2016, intended to be the most affordable of all options, and now average over $5700. For Silver level, deductibles rose 6 percent and now average over $3100. …
Subsidies do not mitigate the fact that consumers have to pay both the premium and then thousands of dollars for care out of their own pocket before insurance takes effect, except in rare and catastrophic circumstances.
Consumers used to have an option for that kind of health insurance – catastrophic coverage, used to indemnify against unforeseen major health events. Those policies featured low premiums and left routine care for consumers to negotiate directly with providers on a cash basis. Combined with health-savings accounts (HSAs), those plans offered a rational approach to balancing health and economic requirements, especially for younger consumers who rarely need more than one or two clinic visits a year, which would cost far less than either comprehensive-coverage premiums or deductibles even in the pre-ACA era.
Instead of “affordable care” promised by President Obama and Democrats, consumers have instead discovered they have effectively been forced to pay for catastrophic health insurance at comprehensive-plan prices. They have become victims of a bait-and-switch scheme that the government would vigorously prosecute – if it wasn’t masterminding the scheme itself. The consumers interviewed by Robert Pear in The New York Times figured out that they’ve been had.
It’s bait-and-switch schemes all the way down, albeit widely predicted. If United pulls out for 2017, we can safely call this an October Non-Surprise.