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Storms Brewing for the ACA: Major Carriers Flee the Exchange

by Precise Leads

May 2, 2016

AffordableCareAct.jpgThe Affordable Care Act has has become one of the most contentious rulings in our country’s history — and recent events are testing the future stability of state and federal healthcare exchanges.

In a less-than-shocking move, UnitedHealth has announced that it will be pulling out of the Affordable Care Act (ACA) marketplaces in most of the states in which it currently operates, according to US News.

Back in November 2015, the U.S.’s largest insurer (by number of people insured) issued a warning of its exit, citing a downgraded earnings forecast and low enrollment growth projections as the cause, as USA News explains.The company blamed the ACA for giving individuals too much flexibility to change plans within the healthcare exchange market.

For its 2017 exit strategy, as detailed in the Daily Signal, UnitedHealth will leave 26 of the 34 state exchanges in which it offered policies during the 2016 coverage period. The company reportedly lost a combined $1 billion in 2015 and 2016 on the exchanges, through which it provided coverage to around 800,000 enrollees, according to the New York Times.

While announcing the company’s decision, CEO Stephen Hemsley gave the current healthcare insurance system a parting shot. "We continue to remain an advocate for more stable and sustainable approaches to serving this market," he said.

To all but the most uninformed observers, Hemsley’s attitude should come as no surprise. The ACA has been one of the most polarizing policy initiatives to come out of Washington, inspiring abundant ire at its initial implementation and during its subsequent roll-out process. So what will UnitedHealth’s exit mean for the market and the state of the ACA as a whole?

Immediate Impacts

The departure will have varying effects in different regions, according to Business Insider. On the national scale, the provider is a small-time player in the exchange, offering mostly high-cost policies which haven’t been popular with those looking for less expensive coverage — the roughly 800,000 people enrolled in UnitedHealth policies through the exchanges are only a small portion of the estimated 12 million people who have purchased coverage through an ACA exchange, as Obamacare Facts explains.

In 2017, when the exit comes, the average person covered under UHC will see slight premium increases of about 1%, or only $4 a month.

In some areas, however, UnitedHealth’s absence will leave a dearth of competition on the exchange market. Unsurprisingly, underserviced rural and Southern regions will be hardest hit.

A Kaiser Family Foundation analysis projected that when United exits, the number of Marketplace enrollees with access to only one or two exchange insurers will increase from 1.9 million to 3.8 million (or from 15% to 30% of all enrollees), and those with only one available insurer will increase from 303 thousand to 1.4 million (or from 2% to 11% of all enrollees).

In Alabama alone, 67% of enrollees will go from having access to plans from two insurers to a single exchange insurer, and the remaining 33% of the state’s enrollees will go from having a choice of three insurers to two. This decreased competition will likely bring about higher costs for enrollees.

Longer Term Effects

While most Americans will remain relatively unaffected by UnitedHealth’s decision, some experts predict that other providers may follow suit and drop out of the marketplace as well. “United isn’t the only one who is going away,” Ed Haislmaier, a senior research fellow in health policy studies at The Heritage Foundation, told the Daily Signal. “Between exits and consolidations, you’ll see fewer competing carriers.”

What’s more, with the flurry of merger and acquisition activity that has gripped the healthcare insurance market in the past year, the giants are consolidating rather than competing, meaning that the field will be narrowed even further. “What I think is going to have more of an impact on premiums is the plan design,” said Haislmaier.

“The pattern that I’m seeing and what is behind United’s move is that insurers for exchange coverage have to offer restricted or narrowed networks. If they’re not set up to do that, then this isn’t a good market. We will see what unfolds over the next few months,” he said. “I think there will be others dropping out, and then we’ll see how the mergers and acquisitions play out.”

Whatever happens, insurance agents should take note: between legislative challenges, according to the Washington Post, changes in the landscape of the healthcare marketplace, and major regime changes among health insurance giants, the ACA is far from settled. Keep your eyes open, and do your best to serve your clients — there’s no predicting what might happen next.

(Main image credit: skitterphoto.com/Pexels

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