While UnitedHealth Group's recently soured outlook on the Affordable Care Act exchanges left the industry reeling, predictions that it could trigger the end of the healthcare reform law may be premature, according to one expert.
It was indeed surprising that the nation's largest health insurer is considering pulling out of the exchanges in 2017, given that just a month ago UnitedHealth announced it would offer plans on more states' exchanges.
Yet the development actually is less significant than it would seem, Henry J. Aaron, a senior fellow in economic studies at the Brookings Institution, writes in an opinion piece for Inside Sources. "It would be a mistake to treat United's announcement, presumably made for good and sufficient business reasons, as a portentous omen of an ACA crisis," he argues.
That's because, Aaron says, of the following characteristics of the ACA individual market and how UnitedHealth operates in it:
- UnitedHealth's main business is employer-sponsored coverage, not individual plans, so it has less expertise in this market and in many cases does not offer the lowest-premium plans.
- The ACA's prohibition on insurance underwriting means insurers must manage risk in order to keep costs down. But that's far easier for Blues plans, which are dominant in the individual market, than UnitedHealth, which controls just a small amount of market share.
- When UnitedHealth entered the ACA individual market in 2015--after sitting out the first year--it likely incurred substantial start-up costs, enrolled fewer customers who turned out to be sicker than expected and experienced an unanticipated degree of attrition.
In a conference call to announce the insurer's revised earnings outlook for 2015, CEO Stephen J. Hemsley also attributed UnitedHealth's losses in the individual market to new, costly members who gained individual coverage during special enrollment periods. But while that has been an issue for other insurers, as the Robert Wood Johnson Foundation's Kathy Hempstead told FierceHealthPayer, both Aetna and Anthem have reassured investors that their performance in the individual market is as expected.
To learn more:
- here's the opinion piece
Despite UnitedHealth's exchange struggles, other insurers still optimistic
Losses lead UnitedHealth to rethink role in ACA exchanges
UnitedHealth's exchange exit threat: What it means
UnitedHealth plans further expansion into ACA exchange market
Despite slow start, UnitedHealth's ACA exchange business has taken off