What UnitedHealthcare Exiting Obamacare Exchanges Means for You

The big news may not impact most enrollees

UnitedHealthcare is exiting most of the Obamacare exchanges at the end of 2016
UnitedHealthcare hasn't been a major player in the Obamcare exchanges, but it will exit most of the exchanges at the end of 2016. Joe Raedle/

In November 2015, just as open enrollment for 2016 coverage had gotten underway, UnitedHealthcare announced that they were experiencing larger-than-anticipated losses in the Obamacare exchanges and warned that they might not continue to offer coverage in the exchanges after the end of 2016. In April 2016, they confirmed that they would exit most of the exchanges at the end of the year.

The Impact of United's Exit

In 2014, UnitedHealthcare only offered plans in the exchanges in five states. That grew to 23 states in 2015, and 34 states by 2016. In the majority of those states, UnitedHealthcare will not offer plans in the exchange in 2017, although they have confirmed that they will continue to participate in a "handful" of exchanges, including Nevada and New York.

UnitedHealthcare is the nation's largest insurer, and this fact has been reiterated in many of the headlines announcing the carrier's departure from most of the exchanges. But that doesn't tell the whole story.

It's true that they're the largest insurer, but their focus is the Medicare market (Medicare Advantage and Medigap supplemental coverage) and the employer-sponsored insurance market, as opposed to the individual health insurance market (the vast majority of the people who have enrolled through the exchanges are on individual market plans).

UnitedHealthcare may be the largest overall insurer in the country, but they insure just 795,000 people in the exchanges — about 6 percent of the people who have enrolled in plans through the exchanges nationwide. And United expects their exchange membership to drop to about 650,000 by the end of 2016. So the vast majority of the people who are enrolled in plans through the exchanges will not be directly impacted by United's exit at the end of 2016.

Premiums and Consumer Choice

Because UnitedHealthcare hasn't been an aggressive player in the exchanges, their plans don't tend to be among the most competitively-priced. The Kaiser Family Foundation conducted an analysis of United's plan pricing relative to other plans in 2016, and found that United offers the lowest-priced or second-lowest-priced silver plans (the most popular options) in only 35 percent of the counties where the carrier offers exchange plans.

In the exchanges, consumers are generally quite price-sensitive, and carriers tend to gain significant market share when their plans are priced lower than competitors. United's position in most markets is not among the lowest-priced carriers, and that reflects in their exchange market share, which is relatively low in most states.

The result of all this is that the Kaiser Family Foundation analysis found that the overall weighted average benchmark plan (second-lowest-cost silver plan) premium would have been just one percent higher in 2016 if United hadn't participated in the exchanges this year. 

But that's a national average. There are some states where the impact on the benchmark premium would have been much more significant if United had not offered plans in 2016 (it's too soon to tell exactly how this will play out for 2017, since rates have not been approved for 2017 yet). There are four states where the benchmark premiums would have been at least $25/month higher in at least 40 percent of the state's counties if United hadn't participated in the exchanges in 2016: Alabama, Iowa, Nebraska, and North Carolina.

And consumer choice is also an important aspect of the exchanges. According to the Kaiser Family Foundation analysis, there are 1,121 counties in the US where there are currently only one or two insurers offering plans in the exchange. If United were to withdraw from all of the exchanges (that doesn't appear likely, as some states have confirmed that United is remaining in their exchanges), the Kaiser Family Foundation analysis found that an additional 532 counties would drop into the category of having only one or two participating exchange carriers (and in addition, 536 of the counties that currently have two carriers would drop to only having one). The result would be that 53 percent of counties in the US would have only one or two participating insurers in the exchange.

So despite the fact that UnitedHealthcare isn't among the lowest-priced options in most of the counties where they currently operate, they do bring increased enrollee choice for people who are shopping in the exchanges, and that will no doubt be reduced in 2017.

At the same time, it's important to keep in mind that other carriers will no doubt enter the exchange markets in some states where United is exiting. For example, in Virginia, UnitedHealthcare will continue to offer plans in 2017, but not in as many counties as they offer plans in 2016 (ie, they're only exiting some areas of the state's exchange). But Cigna is joining the Virginia exchange for the first time in 2017. 

There are two states — Oklahoma and Kansas — where UnitedHealthcare is currently one of only two carriers offering plans in the exchange (technically, Kansas has multiple carriers, but other than UnitedHealthcare, they're all Blue Cross Blue Shield affiliates). United is exiting both of those state exchanges at the end of 2016. Unless another insurer joins, Oklahoma and Kansas would be left with just a single insurer in 2017 (Wyoming is in that situation in 2016, and West Virginia had only one exchange carrier in 2014 and 2015).

Why Is United Bailing?

United's decision to exit most of the exchanges is based on the financial losses they've incurred — and expect to incur — in the exchanges. Between their exchange losses in 2015 and what they expect to lose in the exchanges in 2016, their total losses for that market segment will likely reach $1 billion.

To be clear, UnitedHealthcare is still a profitable company. But they have determined that they cannot let their profitable market segments subsidize their unprofitable exchange market segment over the long run. The people who have enrolled in United's exchange plans have been sicker than the enrollees in their other market segments, resulting in higher costs for the insurer (this problem is not unique to United; many carriers have found that their exchange enrollees are utilizing more healthcare than anticipated). 

In late 2015, UnitedHealthcare announced that they would not pay broker commissions for plans sold in the individual market after the end of 2015. This was an effort to reduce enrollments for 2016, as they had already ascertained that their exchange market segment wasn't shaping up to be profitable.

What Do I Need to Do?

If you're enrolled in an exchange plan through UnitedHealthcare in 2016, you'll be able to keep it through the end of the year as long as you continue to pay your premiums. You'll receive notification from both United and the exchange later in the year giving you information on the steps you'll need to take during open enrollment (the same thing happened for a lot of people on CO-OP plans at the end of 2015).

You may be able to keep an off-exchange version of your UnitedHealthcare plan, but it's important to know that premium subsidies and cost-sharing subsidies are not available on any off-exchange plans. The vast majority of people who are enrolled in plans through the exchanges are receiving premium subsidies.

During open enrollment, you'll have an opportunity to pick an on-exchange plan from a different carrier to replace your UnitedHealthcare plan. To make the process as smooth as possible, the best course of action will be to enroll in a new plan by December 15, in order to ensure a seamless transition and a January 1 effective date for your new plan (Massachusetts, Rhode Island, and Washington state allow enrollments to be completed as late as Dec. 23 for Jan. 1 effective dates, and United is exiting the exchanges in all three of those states).

You may qualify for a special enrollment period triggered by loss of other coverage, and thus be eligible to enroll as late as Dec. 31 for a Jan. 1 effective date. But this is more complicated, and the process will be easier if you pick your new plan by Dec. 15.

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