UnitedHealth Group, the nation’s largest health insurer, said Tuesday
that in 2017 it will exit most of the 34 states where
it offers plans on the Affordable Care Act insurance exchanges.
The creation of state health insurance exchanges were incentivized by the Affordable Care Act (ACA) in order to encourage the offering of health insurance policies at competitive prices to individuals not covered by employer plans. Individuals that earned just enough to be ineligible for Medicaid coverage (aka “the working poor”) could apply for federal subsidies to help pay for exchange health insurance policies. Health insurance companies anticipated that many uninsured people would become premium-paying people resulting in a significant revenue increase to the health insurance companies. Like any insurance scheme, all the companies had to do was to set “competitive rates” (based on their actuarial estimates) that would bring in more revenue than the expense of what they would pay out for claims.
UnitedHealth Group (UHG) is withdrawing from 34 state health insurance exchanges because the company lost $650-720 million on their exchange policies (aka “marketplace polices”);i.e. claims for medical care received exceeded the premium revenue. Speculations about the reasons for this include: the companies priced their policy premiums too low in response to the competitive nature of the exchanges (“They screwed up”); the people who took out these policies were inherently “high-users” of medical services; or the higher than estimated use of medical care represented a backlog of unmet need for medical care.
The fact that the ACA has decreased the uninsured and underinsured in America by 36 million is uncontested. About 12 million or 33% of these people gained access to medical services from policies available from the health insurance exchanges. Close to 87% of those were eligible for and received partial subsidies for the cost of premiums. Most of the rest of the increased access came from expanded state Medicaid insurance subsidized by the federal government under ACA. But 11 million individuals remain uninsured,
“…Depicting the Affordable Health Care Act as a “slippery slope” to single payer is bizarre, given that it relies on private insurance.” (1) Health insurance policies have tremendous influence on medical care delivery by determining who is eligible for what medical service and where. Differential rates, deductibles, and co-pays can favor one type of delivery site (hospital bed, ER, ambulatory center, provider’s office, home care, or nursing home) and even the type of provider (MD, NP, or PA). Specific coverage for selected medical services (named and unnamed when you buy the policy) can be denied. Coverage of prescribed drugs and even procedures can be unilaterally changed annually by the insurance company simply by mailing to policy owners a fine-print booklet that lists what will be available and at what price for the coming year. In a more positive vein, one study showed that in states that expanded their Medicaid programs under ACA the number of newly diagnosed cases of diabetes increased by 23% as opposed to less than 1% in states not choosing to expand Medicaid. Early diagnosis can be life-saving and cost-effective in a chronic disease with effective treatments like diabetes .
The effect of UHG’s withdrawal will have little real effect on the insurance offered by the exchanges. Premiums for policies from the remaining companies may only increase by 1% or $4 a month. But the UHG withdrawal brilliantly spotlights the profit motive as the basic driver of our health insurance system. Private health insurance has a place in any medical care system, and does exist in most, if not all, of the state-based universal health insurance programs in other developed countries, but only in the U.S. do the profit-motivated health insurance companies have such profound influence on to whom and how medical services are delivered.
Despite what some members of my Monday night pool group may say of me, I think capitalism is great. It has produced multiple “wonder drugs”, nurtured the widespread distribution of fantastic medical technologies, and can provide the best medical care in the world… for many… but not all. I also think that is silly to think that profit-motived health insurance will ever be able to provide universal access to medical care, a universal access that could enhance the continued physical and economic good health of our country.
1. The Virtues and Vices of Single Payer Health Care, NEJM 374;15, April 14, 2016; 1401; J. Oberlander, Ph.D.