Today’s news that United Healthcare 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” is a very big deal. United would not be disclosing to shareholders that it might fully or significantly exit Obamacare in 2017 if this was not a significant possibility.
United is a major player in the Exchange markets. It sells policies in about 47% of the 395 rating areas serviced by the federal exchange. Moreover, the loss of United could be very harmful to any remaining competition of the exchange markets. A quick study of data from healthcare.gov shows that if one looks at Silver plans in rating areas in which United sells a policy and one looks at all plan types (HMO, EPO, POS,PPO), there are 204 combinations. In 73 of those (about 36%), United is the only insurer, meaning that if no one else steps in to the United vacuum, there will no longer be a seller of that plan type. HMO plans in Alabama rating area 13 is an example of such a market. If United exits, it would appear that there will be no HMOs in that area.
In another 59 of those 204 (about 29%) rating area/plan type markets in which United participates, United is one of only two players. An example of such a market is the POS market in Arkansas, rating area 1. There, UnitedHealthcare of Arkansas, Inc. and QCA HealthPlan are the only sellers. This means that if no one else steps in, there will be another large chunk of markets in which there will be an Obamacare monopoly.
Moreover, the problems United is evidently facing do not appear to be the result of particularly low prices. The graphic below shows for each of the 204 market-plan type combinations in which United is present, the ratio of United’s its median price for policies to the median of all prices. It shows United prices tend to be fairly close to the median and, if anything, tend to be a bit higher. Thus it will be a challenge to ascribe United’s failures to any sort of extreme pricing — a fact suggesting that either United had problems on the cost side or simply that it is now facing up to a fact that some other large insurers may wish to deny: Obamacare is in trouble.
The ACA simply does not work without voluntary insurer participation. There is no public option and their closest cousin, the coops are mostly dead or in financial distress. It surely should work better if there is at least some competition. But insurers don’t voluntarily participate where they think they can’t make money. So, unless United, one of the biggest health insurance carriers, is doing something particularly wrong or has unduly gloomy management, one has to worry about its warning being an oracle of things to come for other insurers.
In contrast to my usual practice, I have revised this entry fairly heavily during the course of the day. I think it is important to get the information out there and I hope readers excuse some instability in the entry.