United Healthcare’s (UHC) announcement that it will exit Connecticut’s health insurance exchange may not necessarily adversely affect very many residents, but it may represent the first step in a major overhaul of Obamacare.
UHC — the insurance wing of UnitedHealth Group, the largest writer of coverage in the U.S. — said in its quarterly earnings release on April 19 that it plans to withdraw from almost all Affordable Care Act state exchanges, including Connecticut’s Access Health CT (AHCT), by 2017.
“The smaller overall market size and shorter-term higher risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis,” said United CEO Stephen Hemsley during the company’s quarterly earnings conference call.
“Next year we will remain in only a handful of states, and we will not carry financial exposure from exchanges into 2017. We continue to remain an advocate for more stable and sustainable approaches to serving this market and those who rely on it for their care.”
In January, UHC said it had lost approximately $475 million on ACA-compliant plans in 2015 and expected to lose more than $500 million this year, hinting at that time that it might begin pulling out of state exchanges.
Which states will be among Hemsley’s remaining “handful” is unclear at the moment. United had earlier announced it would exit from the exchanges in Arkansas, Georgia and Michigan, and on April 15 it informed the Tennessee Department of Commerce and Insurance of its withdrawal from that state’s exchange. The company has since confirmed that it is also leaving Alabama, Colorado, Louisiana, Maryland, Missouri, Nebraska, North Carolina, Oklahoma, Pennsylvania, Texas and Washington.
“We do not have an update on New York at this time,” said UHC spokeswoman Maria Gordon-Shydlo.
Connecticut officials moved quickly to reassure residents that they will not be left out in the cold. In a statement, Lt. Governor Nancy Wyman, who also serves as chair of the AHCT board, said, “Health care exchanges throughout the country are impacted by United Healthcare’s decision, so first and foremost, we want to assure Connecticut customers that their health benefits remain unchanged through the end of the year.
“We are confident that in the next open enrollment, all of our consumers will continue to find the health care plans that best meet their needs,” she continued. “State exchanges will have some fluctuation, but AHCT will continue to meet the needs of Connecticut residents.”
Added AHCT CEO Jim Wadleigh: “Be assured that the team at Access Health CT is dedicated to making this transition as smooth as possible as their customers reenter the marketplace in 2017. We will reach out to the consumers who auto-renew and help them choose a new plan. The Affordable Care Act creates a dynamic marketplace, which is exactly what we want for consumers.”
The three other carriers that sell plans through AHCT — Anthem Blue Cross and Blue Shield, ConnectiCare, and HealthyCT — have indicated they plan to continue offering coverage through the exchange at least through next year.
In a move unrelated to UHC’s, MetLife will be exiting Access Health’s Small Business Exchange (SHOP) by the end of 2016 due to limited enrollment. “This will not affect current policy holders, whose service will remain unchanged for the duration of their plans,” said company spokeswoman Kim Friedman. “Off the exchange, MetLife will continue to offer a stand-alone dental plan in Connecticut that has been certified by Access Health as an Affordable Care Act-compliant stand-alone dental plan.”
As of April 11, United Healthcare had 1,477 Connecticut enrollees, representing 1.3 percent of AHCT’s total enrollment. Sixty-one percent of those enrollees live in Fairfield County. In the small business market, United Healthcare had 18 employers representing 124 residents.
Relatively small figures, then, but some observers said their putative numerical insignificance has been overstated by others.
“A lot of press reports have taken the view that ‘this is just one insurance company,’” said Robert Laszewski, president of Health Policy and Strategy Associates, Inc., a policy and marketplace consulting firm. “That’s true — but it’s sitting on top of all the others who are losing their shirts.
“If the largest and most successful insurance company in the United States is not finding the Obamacare insurance exchange tenable,” he added, “that raises a lot of alarm bells.”
Laszewski noted that UHC’s move comes not just after its January announcement of nearly $1 billion in losses but also a report by global consulting firm McKinsey & Company stating that in 2014, insurers lost money in 41 states in the individual insurance market.
“Just because United Healthcare is pulling out is, in and of itself, not a huge deal,” said Seth J. Chandler, a professor at the University of Houston Law Center who has taught life and health insurance law for a number of years and served as a co-director of the Health Law & Policy Institute. “But if something like Blue Cross pulls out, it will be.
“But that kind of misses the point,” he continued. “This is a symptom of a much more fundamental, pervasive problem — that the insurers are losing a lot of money.”
Indeed, the “affordable” part of the Affordable Care Act — long a point of debate — has come under greater scrutiny in the wake of a report in March by Blue Cross Blue Shield. According to that insurer, recent enrollees in the state marketplace plans used up “significantly more medical services in their first year of coverage”; as a result, the costs associated with medical services for marketplace enrollees were 22 percent higher than those for other types of enrollees.
Chandler, whose feelings about Obamacare are made plain by the name of his blog, “ACA Death Spiral,” said that without major amendments — or an entirely new system put in place to replace it — the Affordable Care Act will end up “pretty catastrophically” for carriers and individuals alike.
“I think you’ll see other carriers get out” of the exchanges in the wake of United, he said. “But even if they stay in, what does it mean? At what price to consumers? They could raise rates by 25 to 30 percent.”
He went on to predict that, if left unaddressed, most consumers would no longer be able to afford “Gold” health insurance plans (where the carrier typically pays 80 percent of costs) or even “Silver” (where the carrier pays 70 percent) but would be faced with paying for “Bronze” HMO plans at much higher rates than they do now.
In Laszewski’s view, United’s move means that Obamacare is “unsustainable.” As a result of carriers’ skyrocketing rate increases to try to return to profitability, he said that he expects “an enormous amount of lobbying to get [the system] fixed. You’ve got to believe that it’s going to get fixed, because it has to be fixed.”
Meanwhile, non-AHCT giants Aetna and Anthem are unlikely to join UHC’s exodus. Although Aetna CEO Mark Bertolini expressed “serious concerns about the sustainability of the public exchanges” in February, Aetna and Anthem have both said they remain committed to the exchanges.
Then again, both companies are awaiting federal approval of proposed mergers: Anthem has proposed a $52.5 billion takeover of Cigna, while Aetna has proposed a $38.5 billion merger with Humana. “I don’t expect them to go anywhere or rock any boats,” said Laszewski.
As for the AHCT’s future, time will tell. One of its three remaining carriers, HealthyCT — a Wallingford-based co-operative that is sponsored by doctors and governed by members — lost $28 million in 2014 and well over $10 million last year, though CEO Ken Lalime has said he does not expect to turn a profit until 2017.
AHCT’s next open enrollment period begins Nov. 1 and runs through Jan. 31, 2017.