UnitedHealth Group may exit ACA exchanges: What to Know
During the first half of 2016, UnitedHealth Group will determine to what extent it can to participate in the public exchange markets in 2017. Here's what this means for the industry.
UnitedHealth Group is expressing hesitancy over whether it will continue to participate in Affordable Care Act (ACA) exchanges due to significant revenue losses. That's according to a
"In recent weeks, growth expectations for individual exchange participation have tempered industry-wide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step," Stephen J. Hemsley, chief executive officer of UnitedHealth Group, said in the statement. "We continue to be pleased with the growth and overall performance of our company outside of the individual exchange products and look forward to strong, positive and broad-based earnings growth across our enterprise in 2016."
The company says it has pulled back on its marketing efforts for individual exchange products in 2016, and is evaluating the viability of the insurance exchange product segment. During the first half of 2016, it says it will determine to what extent it can to participate in the public exchange markets in 2017.
Industry experts react
James R. Smith, FACHE, senior vice president, The Camden Group, says the announcement is both surprising and not surprising. Surprising, he says, because UnitedHealth has a huge stake in finding a way to be successful and profitable in this new market. Not surprising, he says, because many people still do not understand the subsidies or choose to ignore them, thus, it is understandable that UnitedHealth has encountered difficulty.
"Many believe those who do not enroll [in exchange plans] tend to be healthier than those who do," he says. "Thus, the risk profile of those who have signed up may be higher than anticipated leading to the losses. The other reason they may have losses is that their strategy is to build market share by lower prices and it has succeeded too well, and they now must reposition their product and prices by market."
Jon Kingsdale, PhD, managing director, Wakely Consulting Group, says that while the UnitedHealth Group statement is noteworthy, it is not terribly surprising to him. "Marketplaces are local markets where 'price is king,'" he says. "United is a national player with little competitive advantage in this local segment. Specifically, it lacks the local provider relationships and market share that [is advantageous] to Blues plans, Medicaid managed care, and nonprofit HMOs in this segment. Also, the intense price competition in marketplaces generally makes them less attractive to for-profits than to local nonprofits."
Jonathan Rickert, chief executive officer and cofounder, Array Health, says the concerns about the public exchange marketplaces being expressed by UnitedHealth are echoed by many of Array's insurer customers. "Because of these problems, there is growing interest by insurers in going directly to the consumer market through their own private exchanges," he says. "This approach allows insurers to properly price their individual products with the option to also sell ACA-qualified health plans. Private exchanges also give insurers the opportunity to offer voluntary products, such as life, long-term disability, accident etc."
Internal server error