UnitedHealth to avoid 2016 public exchange plan sales

The company has about 540,000 enrollees in PPACA exchange plan coverage, 160,000 in PPACA-compliant off-exchange individual coverage, and 500,000 in individual policies that have been in effect since before January 2014, when the major PPACA commercial health insurance market changes took effect.

Executives said they expect 2016 exchange plan enrollment to be comparable to 2015 exchange plan enrollment, in spite of the lack of marketing support.

Dan Schumacher, UnitedHealth’s chief financial officer, said that most of what the company was saying about the outlook for PPACA-compliant exchange coverage also applies to PPACA-compliant off-exchange individual coverage. 

UnitedHealth executives sounded only mildly disappointed in the performance of the company’s individual health business when they talked about third-quarter earnings.

See also: Health margin squeeze nips UnitedHealth

Analysts on the call today asked the UnitedHealth executives why they now sound so much grimmer about the state of the individual health business.

Hemsley said the company’s view has changed, in part, because projections suggest that overall exchange growth will be much slower than the company had originally expected. The soft HealthCare.gov sign-up figures for the second week of the open enrollment period confirmed what the company was already thinking about exchange system performance in 2016, he said.

UnitedHealth was hoping exchange program managers would find ways to keep people from using the PPACA ban on medical underwriting as an invitation to be “free riders,” or wait until they got sick to sign up and pay for coverage.

Instead, Hemsley said, the company has seen many individuals using the PPACA special enrollment period (SEP) system to enroll outside of the regular open enrollment period when they see they have significant needs for health care. “These have been strong users of services,” he said.

Schumacher said that about 20 percent of its PPACA-compliant individual health enrollees have been SEP enrollees, and that, due to enrollee attrition, SEP enrollees will make up about 30 percent of its PPACA-compliant individual health enrollees at the end of the year. The SEP enrollees who come in through the exchange use about 20 percent more care than other exchange enrollees, he said.

Off-exchange SEP enrollees use about as much care as other PPACA-compliant individual health enrollees, possibly because of UnitedHealth’s efforts to verify whether the SEP applicants qualify for SEPs, Schumacher said.

The older individual health policies sold under the pre-PPACA rules have been performing in line with the company’s expectations, executives said.

Hemsley said that UnitedHealth hopes the exchange system will evolve to become a viable market, and that the company will consider continuing to participate if the system works better.

But, when the company was reviewing its individual health business recently, the feeling was “the trends were not going to improve,” Hemsley said.

Marilyn Tavenner, the president of America’s Health Insurance Plans (AHIP), who helped run the PPACA public exchange system earlier this year, when she was administrator of the Centers for Medicare & Medicaid Services (CMS), said in a statement that AHIP has been very clear with the Obama administration about the serious challenges facing consumers and health plans in the public exchange market, including the failure of the PPACA risk corridors program.

“Most recently, nearly 800,000 Americans have faced coverage disruptions as a result of the significant and unexpected shortfall with the risk corridors program,” Tavenner said in the statement. “When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result. The administration must act to ensure this program works as intended and consumers are protected.” 

Standard & Poor’s Ratings Services said in a bulletin that the UnitedHealth individual health problems would not affect the ratings it has assigned the company. S&P said that it still expects UnitedHealth to have pretax operating income equal to about 7 percent to 8 percent of revenue in 2015 and 2016.