On November 19, 2015, UnitedHealth, in a conference call for investors, announced it may abandon the law’s insurance exchange marketplaces in 2017 after suffering $425 million in losses on these policies.
UnitedHealth sells policies on about half of the PPACA exchanges.
UnitedHealth’s departure would not be devastating, as it insures about 5 percent of the roughly 10 million Americans with exchange marketplace plans.
However, the impact could be dramatic in a handful of states where UnitedHealth dominates PPACA coverage, and the company’s bad economic experience may foreshadow similar problems for other insurers.
Here are 5 major reasons for UnitedHealth’s problems, all but one of which are not unique to United.
Editor’s Note: In-depth coverage of these issues (and more) can be found at Tax Facts Online, which provides a comprehensive guide to advising clients on tax and financial issues.
1. Partial year insureds
One of the chief problems cited by UnitedHealth was persons who sign up for coverage after the annual open enrollment period, quickly incur claims, and then drop coverage without having paid much in the way of premiums.
This problem is more acute for people joining during a special enrollment period that is available in certain circumstances, such as childbirth, marriage, or loss of existing coverage.
At the Credit Suisse Healthcare Conference in Arizona, Aetna Inc. CFO Shawn Guertin described his company’s similar experience: “There’s a lot more people … coming in [during] the special enrollment period … and then staying for only a few months and then dropping [coverage] and obviously getting service along the way.”
2. Healthier individuals lacking on exchanges
Another problems described by UnitedHealth is that enrollees are disproportionately older, less healthy, and more expensive.
That’s been an industrywide problem under PPACA, which has seen less than 30 percent of signups go to the 18-34 age group, 10 percent less than what’s needed.