A few weeks ago, UnitedHealth announced that it was dropping out of the Affordable Care Act’s insurance exchanges in at least 16 states. The insurer sells individual ACA plans in 34 states, although it hasnt yet confirmed which state markets it will be leaving. UnitedHealth is also withdrawing from some state insurance markets that were designed for small businesses as well.
The announcement didn’t come as a huge surprise – UnitedHealth had previously warned in November of losses in the individual insurance markets. CEO Stephen Hemsley said that the company would end up selling “Obamacare” plans in only a handful of states, noting that the exchange market was proving to be smaller and riskier than the insurance giant had anticipated. UnitedHealth and other insurers have publicly stated that insuring customers on ACA exchanges was more expensive than they expected. It’s not entirely clear why that came as a surprise since the cohort of individual insurance purchasers was already known to be sicker than the average beneficiary.
The insurance giant had nearly 800,000 customers on ACA insurance exchange plans as of the end of March, although they make up a small part of the company’s total membership of 47.7 million subscribers. Despite the losses from the ACA markets, UnitedHealth posted profits that beat investor estimates thanks to it’s consulting and technology arm, Optum.
The company admits that it may have rushed into the ACA insurance markets too soon and too quickly. Other insurers, like Cigna and Aetna, cautiously entered the markets. They may have benefited from letting the markets shake out a bit before entering the game. Incidentally, Cigna and Aetna have announced plans to enter a few new markets this year.
So what does it mean for consumers? Well, people who are currently enrolled in a UnitedHealth plan will need to choose a new insurance plan during the next open enrollment plan. The ultimate impact will vary by state. UnitedHealth’s departure from some markets may leave some slim pickings. In some parts of Florida and Oklahoma, consumers will only be left with one option. In markets where UnitedHealth was a relatively small player, consumers will have more options to choose from.
And what does it mean for the Affordable Care Act at large? Well, UnitedHealth isn’t ditching the individual market entirely. so it may very well get it’s ACA house in order and re-enter some markets in the future. Furthermore, other insurers may expand their options into some of the markets abandoned by UnitedHealth. But the individual insurance markets were designed to invite competition and allow capitalism a greater foothold in the marketplace. Just because one company partially failed at that, doesn’t mean it’s the end of the ACA as we know it.