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United Drops the Other Shoe on Obamacare; Will Other Plans Follow?

United Drops The Other Shoe On Obamacare; Will Other Plans Follow?

Having warned that it was extremely troubled by the financing and risk in the Exchange Marketplace, United Healthcare announced what many had expected – that it will indeed largely pull out of Obamacare in 2017, save for a few states and counties nationwide. The announcement came even as United reported better than expected earnings results for Q1 2016 and a better outlook for the year.

The first few years of the great healthcare experiment have been extremely rocky, with a series of missteps and miscalculations, including:

  • The meltdown of the Marketplace web leading up to year one open enrollment
  • The massive under-funding of the risk corridor program that led to plans receiving just 13 cents on the dollar for year one reconciliation
  • The folding and exodus of a number of co-ops and small plans throughout the country
  • The November 2015 announcement by United that it had to reduce its earnings forecast due to poor performance in its Exchange line of business
  • Anthem, a large Blues plan in more than a dozen states with significant Exchange enrollment, reporting a poor fourth-quarter 2015 showing
  • Other major Blues plans with heavy name recognition (which attracts significant membership) echoing Anthem’s concerns
  • Rumblings by Aetna about costs due to liberal open enrollment rules
  • Humana’s announcement about its Obamacare financial woes

The Obama administration is downplaying the impact of United’s pullout. But while a small percentage of overall enrollment, United does offer one of the two lowest cost Silver benchmark plans in about 40% of the counties in the national Exchange marketplace. These Silver plans are the products most Americans with premium and cost-sharing subsidies enroll in. Importantly, the Kaiser Family Foundation has forecast that a full United pullout would increase the number of counties with only one or two insurers from 36 percent to 53 percent.

Despite some of CMS’ notable successes on the operations and enrollment front, some of the other large plans and big regional players could follow suit and either withdraw in total or significantly realign their strategies. This is likely to happen at least with Humana (being acquired by Aetna), as it has a very profitable Medicare line of business. Mind you, not all of the major players were as pessimistic on Obamacare as United has been. Aetna and Anthem have consistently fallen short of statements characterizing imminent withdrawals even as they registered concerns. Cigna, which is being acquired by Anthem, even stated it expected losses for a few years. But, their concern will now be whether their financial situations deteriorate even more: high-risk individuals tend to flock to known plans and, with fewer of them available, the less the adversity is divided up.

The potential exits point to the fact that the Marketplace remains a volatile place. The risk could substantially increase with the sunsetting of two of the 3Rs – risk corridors and reinsurance – in 2016 (Risk Adjustment is a permanent feature of the program). This undoubtedly will lead remaining health plans to seek significant premium hikes to hedge the risk, especially given the underfunding seen in year one of the risk corridor program.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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