Two weeks ago we reported that after its November warning that it may exit certain Obamacare markets as a result of substantial losses, the largest U.S. health insurer UnitedHealth, did just that when it announced it would no longer sell plans for next year in Georgia and Arkansas.
Then over the weekend, UnitedHealth also added Michigan to the list of states whose Obamacare market it would no longer service. As Bloomberg reported, "the insurer won’t sell policies through Michigan’s ACA exchange for next year, according to Andrea Miller, a spokeswoman for the state’s Department of Insurance and Financial Services. Georgia and Arkansas said last week that UnitedHealth will quit their exchanges for 2017."
And then, moments ago in the latest hit to Obamacare, United added Oklahoma as the 4th state to the growing list of Obamacare markets it refuses to service.
What will the consequences of this exodus be?
According to Bloomberg, "while Michigan and Arkansas can probably weather UnitedHealth’s move, some consumers in Georgia and Oklahoma may feel a lack of choices, according to a Kaiser Family Foundation analysis of UnitedHealth’s offerings across the U.S."
Michigan should be able to endure the loss of United because the insurer only participates in seven of the state’s 83 counties, and it’s not among the cheapest in any of those counties, according to the Kaiser analysis. United also wasn’t offering cheap plans in Arkansas. In Georgia, however, the loss of UnitedHealth will cut the number of insurers to just one or two in about half of the state’s counties, though those counties account for just 11 percent of the state’s population. The insurer offered one of the cheapest plans in 34 of the state’s 159 counties.
Worse, on the current trend, UnitedHealth will likely announce the exit of more states in the coming days.
The reason is that Obamacare’s success depends on insurers selling plans in government-created markets, called exchanges, in each state. The fewer insurers participating, the harder it is for the program to achieve its goal of extending coverage to more Americans. Other states where consumers would have the most to lose if UnitedHealth drops out include Alabama, Louisiana and Tennessee, according to the Kaiser study.
And since by definition, that is also where UnitedHealth is losing the most money on this foolishly constructed attempt to centralize health insurance, those are the markets where UnitedHealth (and soon others) will likely exit next.
"It’s likely that in places where they were one of the only insurance companies, and they priced low relative to their competitors, they’re important players,” Cynthia Cox, one of the report’s authors, said by phone. "In certain areas, there would be a need for individuals to shop around."
According to Bloomberg calculations, UnitedHealth offered ACA plans in 34 states for the current year. If UnitedHealth left all those states’ exchanges, about 3 million ACA enrollees would see their choices reduced to just one or two insurers for next year, the Kaiser study shows. About 9 million people would still have three or more plans to pick from.
Naturally, the government is eager to downplay these accelerating defections, alleging that UnitedHealth is at best a marginal player in the state exchanges it has vacated: "the U.S. Department of Health and Human Services said the report shows that UnitedHealth plays a relatively small role in the ACA’s markets. HHS has previously said it expects insurers to enter and exit the ACA each year, and that it expects the ACA’s exchanges to “continue to thrive.”
That, of course, assumes that other insurance providers won't leave next; and they likely will because the way Obamacare is structured, not only being the "last company standing" in any given market, and thus being the much desired monopoly, will provide incremental benefits to either the top or the bottom line.
As for UnitedHealth, as noted above, it will likely announce more defections in the coming days. Other states where UnitedHealth posted big losses in its individual business include Florida, North Carolina, New York, Alabama and Louisiana, according to Ana Gupte, an analyst at Leerink Partners. She said UnitedHealth will probably take into account those losses as well as its 2017 outlook as it decides which states to exit.
Bloomberg adds that if UnitedHealth left the New York exchange, every consumer in the state would still have at least three plans to pick from. Here’s what a UnitedHealth exit could mean in some other states:
- Alabama: Two-thirds of the state’s population would have just one choice of insurer, and the rest would have two. United offers one of the least-expensive plans in 66 of the state’s 67 counties.
- Louisiana: Consumers in most of the state would have just two health plans to pick from. UnitedHealth offered one of the cheapest plans in about three-quarters of the state.
- Florida: It’s the state with the most Obamacare enrollees. More than a third of them would have a choice of only one or two health plans if UnitedHealth exited.
But the scariest news for the president's legacy healthcare program is that UnitedHealth is far from the only insurer struggling with selling individual health plans, which includes ACA plans. Industry-wide, insurers spent $1.02 on medical care for every premium dollar they took in last year, meaning they lost even more money when administrative expenses are included, according to Brian Wright, an analyst at Sterne Agee CRT.
It also means as UnitedHealth boldly exits more and more states, many others will shortly follow.