United Health will carry through on its threat made last year to dump Obamacare offerings because it is bleeding cash on the health care exchanges.
Yesterday, United Health announced it will “remain in only a handful of states”. Currently the company offers plans in 34 states.
Please consider United Health Dumps Out of Obamacare Exchanges.
U.S. health insurer UnitedHealth said Tuesday it would largely exit the Obamacare individual insurance market in 2017, citing expectations for mounting losses from the program.
UnitedHealth is the largest U.S. health insurer and one of the biggest sellers of plans on the exchanges, which were created as part of President Barack Obama’s national healthcare law. UnitedHealth sells these plans in 34 states this year, up from 25 states last year.
“Next year, we will remain in only a handful of states,” UnitedHealth CEO Stephen Hemsley said in prepared remarks as part of the company’s first-quarter earnings report.
The company warned investors late last year that it was losing money on the new plans and might exit the market. On Tuesday, the company raised its 2016 expectation for losses on the exchanges by $125 million to $650 million.
The government said in February that more than 12 million people had signed up for Obamacare-related insurance through HealthCare.govor a state-based exchange as of Jan. 31. Previous government expectations had been for more than 20 million people.
Death of Obamacare?
The debate is on: Will Nation’s Top Health Insurer Kill Obamacare?
Ipsita Smolinski, managing director and health care analyst at Capitol Street, told CNBC on Thursday that exchange participation collectively cost insurers $2.5 billion last year.
In its third quarter conference call last month, Anthem lowered its guidance for profits next year below analysts’ expectations, citing lower-than-expected enrollments through the exchanges, among other things.
Aetna CEO Mark Bertolini was likewise cautionary on the company’s earnings call last month.
“The individual business remains challenging, especially in light of the continued administrative changes for this new and developing membership pool,” he said, adding that Aetna would participate in 15 state exchanges next year, two fewer than this year.
Comments like that make clear that “the vast majority of public exchange insurance products are clearly not yielding a required level of return based on results reported by the large managed-care players,” Morningstar analyst Vishnu Lekraj said in a research note.
Those comments and that article are from November 2015. United Health has since decided it has had enough. Others still complain.
Obamacare Death Spiral
On April 15, I wrote Obamacare Death Spiral: Insurers to Drop Plans Unless Premiums Rocket, “Something’s Got to Give”
Insurers say they are losing money on their ObamaCare plans at a rapid rate, and some have begun to talk about dropping out of the marketplaces altogether.
“Something has to give,” said Larry Levitt, an expert on the health law at the Kaiser Family Foundation. “Either insurers will drop out or insurers will raise premiums.”
While analysts expect the market to stabilize once premiums rise and more young, healthy people sign up, some observers have not ruled out the possibility of a collapse of the market, known in insurance parlance as a “death spiral.”
The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage from employers.
And a report from McKinsey & Company found that in the individual market, which includes the ObamaCare marketplaces, insurers lost money in 41 states in 2014, and were only profitable in 9 states.
“Absolutely No Risk of Obamacare Marketplace Collapse”
Dr. Mandy Cohen, the chief operating officer of the Centers for Medicare and Medicaid Services (CMS), said in an interview that there is “absolutely not” a risk of a death spiral or collapse in the ObamaCare marketplaces.
I commented ….
The smart money bet is generally against those touting “absolutely no risk”.
My personal choice: death-spiral narrowly averted by massive premium hikes, consumer unfriendly rule changes, and worsening coverage.
United Health has about 500,000 members with Obamacare plans, making it the fourth-largest insurer on the exchanges.
Questions of the Day
- If United Health dumps 500,000 Obamacare plans because they are losing money, what companies will pick up those insureds? At what cost? With what rise in premiums?
- What companies will be next to dump Obamacare?
- The BLS reported healthcare costs only rose 3.6% last year. (Please see Diving Into the CPI: What’s in Your Basket?). How much did your costs go up? How much less coverage did you get in the process?
- Is there really “absolutely no risk” of a collapse in the Obamacare marketplace?
One of those questions has a known answer, and you know which question I mean.
Mike “Mish” Shedlock
Sounds like they made a decision to corner the market, and cornered themselves.
I donât remember anyone telling insurers what they should charge. Is there more than came out in the press?
60 minutes came out with an exciting (for some) expose on life insurers who keep beneficiaries monies for a variety of reasons.
Bloomberg is carrying an Axe for Fidelity in todayâs editorials.
The old ways of doing business may be dying! It happens to all, eventually.
Steve A
This is all just fricking sad. I’m glad I’m oldish. In a couple years I’ll be able to get Medicare, which is the holy grail if you also get the ancillary policies. Right now I’m covered by workplace health insurance. Being young today is frightening for lots of reasons, mostly economic. When I was young, i was happy to strike out on my own, take chances, and trust there would always be another opportunity somewhere. Today, that would be reckless. Or a necessity, i assume, if the alternative is begging for a junk job somewhere.
Thanks Obama, and Bush, and the federal reserve starting with Greenspan but especially Bernanke.
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The perceived increase for 2017 has left nearly a 3 Million probably 4 million when it is all said and done hole in our Town School Budget……
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. Hello Property Taxes, which are already incredible.
.
.AND GOODBYE SENIORS, you made the Town, you lived here all your life, thanks to
you we have a great town with great schools,
.
NOW YOU MUST GO, you see we have to raise the taxes to pay for the children,
even though you have paid for 50 years already and your kids graduated 30 years ago.
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. Goodbye Seniors, Please Leave As Soon As Possible.
.
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If they all leave and Hilarious becomes President, you can bet that they will opt for a National Gov’t health system. That may well have been the plan all along and it has been done before as politicians seek control and leverage over the voter.
I think the biggest clue to the whole plan hit the news today… Take Andrew Jackson (the anti banker president) and replace him with some woman named Tubman.
Any candidate who wants to bring back Andrew Jackson on the twenty dollar bill and instead make Tubman a replacement for Susan Anthony on the coin will get my vote.
“Remember the Central Bank Slayer” -Should be first item on the agenda for the new GOP president.
Perhaps the cultural Marxists are inadvertently slitting their own throats and doing us a favor in the process by bringing to the forefront discussion of the president who killed the National Bank.
Every time I look at Jackson’s picture on the fiat, no intrinsic value $20 Federal Reserve (Central Bank) Note I think of what an irony that is, and how he must be rolling in his grave.
The only time in US history when the federal debt was just about paid off was during his administration.
My premium at Blue Shield of California has gone up by 30% over the past year. I turned 35 which apparently according to their calculations automatically makes me a 30% larger risk, even though I’m rarely ever sick, rarely ever visit the doctor, eat consciously healthy (very low carbs), and consume iodine and other herbs and minerals that the body needs regularly. Not that they give a shit about any of those things.
I need to see a doctor for ADHD medications & SSRIs (anti depressants).. both are available as generics… been taking generic prozac & adderall for years along with Gabapentin.. I am covered thru employer so just pay the copay for doctor and $5 for each medication
I would like to inform readers concerned about the issue of ever-increasing insurance costs of an alternative they might want to consider if they qualify.
My wife just reduced her premiums from around $650 on the Blue Cross plan here in Montana to $150 by signing up with a Christian Health Ministries plan. $500 deductible and if you can negotiate a reduction in costs with healtcare providers, the savings applies against the deductible. There are some requirements, however. You need to be a regular church-attender, not use recreational drugs or be a heavy drinker. It is not insurance from a legal point of view (you don’t have a “policy”), but it does qualify as an approved plan under Obamacare, so you do avoid the penalty. There are exceptions against pre-existing conditions, but these fall away after a 3 or 4 year period of time and are then covered completely.
Mr. Ni Ma sounds like a healthy fellow and should not have any problem qualifying, assuming he meets the normal conditions for enrollment. By the way, their customer service is absolutely first class and friendly. Try that with the Obamacare marketplace or your Blue Cross folks.
Very interesting, thanks for that information!
Mish,
I think one important angle is the way the subsidies work. As long as you are under 400% of the FPL (federal poverty level) you actually will BENEFIT in many cases by higher premiums. This is because the subsidies are based off 2nd lowest silver plan in area, and higher price of premium, the bigger subsidy. The result is many zero or near zero dollar bronze plans (which make a lot of sense if you are moderately healthy).
Who will get screwed are those without work coverage but who make more than 400%, but not huge bucks (say $250k plus. If you make 250k plus and insurance goes up $5k, sucks but not a huge deal. If you are a couple making $80k and insurance is now $15-20k a year, you are really in trouble).
Not the first person to put this analysis out there, but wasn’t sure if you are aware. Message me if you are curious for more details!
Basic predictions:
1) Death spiral avoided because of the subsidy issue mentioned (because 70-85% of people get subsidies)
2) To account for more unhealthy mix you probably need 15-25% hikes (a few thousand a year). Again, that is a lot of money, but not fatal due to prediction 1
3) many smalll business owners / groups will go back to offering plans due to them getting hammered with more expensive coverage since they don’t get subsidies, and also because the exchange plans will keep moving to “narrow networks” and other gimmicks to hold down cost
The only way for the exchanges to become largely profitable is for the feds to actually start billing millions of uninsured people an amount that would make it smart for them to buy healthcare through the exchanges.
There are tens of millions of people who have not signed up. The amount of “tax” would have to be in the thousands to get you to spend the many more thousands necessary to get health insurance. What politician is going to sign up for that? That is a guaranteed vote against you.
This whole thing was an idiotic farce to begin with. Take it out and quietly put a bullet in the back of its head.
If United were to exit from all areas where it currently participates and not be replaced by a new entrant, the effect on insurer competition could be significant in some markets – particularly in rural areas and southern states. If United were to leave the exchange market overall, 1.8 million Marketplace enrollees would be left with two insurers, and another 1.1 million would be left with one insurer as a result of the withdrawal. United does not generally offer low premium plans in the Marketplaces. It has the lowest or second-lowest silver plan in 35% of counties (647) where it participates in 2016, representing an estimated 16% of marketplace enrollees overall. Even when it did price relatively low, it was often not significantly lower than its nearest competitors. As a result, the effect of a United withdrawal nationally would be modest. The national weighted average benchmark silver plan would have been roughly 1% higher in 2016 had United not participated (less than $4 per month for an unsubsidized 40-year-old).
http://kff.org/health-reform/issue-brief/analysis-of-unitedhealth-groups-premiums-and-participation-in-aca-marketplaces/
I’ve had MDs tell me Obamacare was set up to fail: allowing the government at some point to completely take over healthcare. The MDs, by the way, are mildly liberal types, not right wing nut jobs.
Obamacare is designed to show, once and for all, that the private sector cannot adequately provide health care for the entire population. It will fail and will be pointed to as proof of the need for government intervention in the future.
back in 1993, congress did a study of universal health care and told Clinton it was too expensive because of the high amount of inner city crime. That was before we started being overrun by illegals and when people were working for a good paycheck and benefits. Failure was in the cards back then.
You’re right, socialism can only work when administered from a single central command. Insurance IS socialism (or worse) as it seeks to redistribute costs from sick to well. If thought about in its entirety, the only reason why a person buys insurance is in the belief that it will cost them less than if they paid out of pocket. If it was simply a means of spreading the costs over time under the assumptions that your premiums would somehow add up to your total expenditures, then we could have much more easily set up a national health savings plan that would have allowed that monetary accumulation to occur, and offer low interest emergency medical loans backed by government like they do education loans….but they don’t, do they.
People are suffering under the “something for nothing” delusion that infects all socialist schemes. Those receiving medical services are unconcerned about cost if they have insurance, especially if their deductible is met, and one can only imagine if no deductible existed.
The market is the only cost restraining tool we have, and insurance does all it can to destroy that possibility. Doctors and hospitals REFUSE to set prices to the consumer…even thought they MUST for the insurance companies. No other circumstance are we forced to sign an agreement to pay ANY and ALL bills without knowing what they will be.
Government wants to run the insurance racket because our government IS an insurance racket. It is all they do. They spend every other breath WARNING us of some imminent danger and with every other alternate breath insist that only THEY can save us. No different than any Allstate commercial. Only their premiums rise even faster than Allstate
Insurance IS socialism and it will fail for exactly the same reason. We are all told we must sacrifice for the collective, a collective that we increasingly discover we are not the beneficiaries of. We are pressed with ever higher costs and seek any opportunity to recover those costs, even if it incurs great waste to do so. And we are told with each passing year how there just isn’t enough money, that benefits will need to be cut, that rates (taxes) will need to be raised, and ANYONE so lucky as to enjoy any success under this suffocating regime will find a target painted on their backs, vilified and punished, seeking that ever illusive “economic justice”. It will fail because the only winners will be the takers, and NO ONE will want to be the providers, until like every other ecosystem, they become extinct.
It was assumed at our founding that our principle unalienable right was our freedom, that we were not the property of anyone. Today we find we are ALL born into servitude as we are forced to carry the burdens of our fellow man. Our government is determined to create its Utopia in the progressive image where we do not live in peace and freedom and plenty due to our own free will, but through force and coercion. Our taxes were to be for the “common good” meaning the funds were to be to all of our use, not a specified enumerated subset deemed given the short end of the stick. Taxation specifically for the means of redistribution is the rule, not the exception now. Anyone so brazen as to work and achieve is told to do so is contrary to societal interests, that any effort must also be accompanied by responsibility…tribute to the world that “allowed” it. We have allowed ourselves to become slaves. We work and toil to provide food for our table, but also all those who administer us and all of the hungry voices who either cannot or CHOOSE not to feed themselves yet muster their might to ensure the “redistributors” stay in force.
Your health insurance premiums are NOT for YOUR healthcare. They are for the COLLECTIVE.
Single payer here we come. Less access and higher costs on the horizon. It’s all playing out as intended. I agree with your MDs.
My policy was cancelled in 2015 because it was non ACA compliant. I only wanted a catastrophic policy, but because of my age (57) this is not allowed. I elected to be uninsured in 2015. I now have a policy that is still not ACA compliant (no maternity care, juvenile coverage, etc) but does meet my needs. I could get an ACA policy, but I’m not big on forced participation. I’m hoping it does collapse and we get a new president that is against single payer. What are the chances???
And exactly whom do you expect to pay for “single payer” which would be vastly more expensive and which would require HUGE TAX INCREASES for all in America including the 45% who presently pay no federal income taxes?
“Death of Obamacare?”
Birth of single payer?
Death of freedom. We are ALL our brother’s keeper now, by force of law.
Or, if Hitlery is elected, then Big Sister’s keeper. Do you trust the worst pathological lying politician of all time? (ok maybe tied with her husband).
maybe – just maybe – partly explains weak auto & retail sales Q1 …
no no no Tony, it’s the WEATHER!
Anyway Mr. Market could care less, the market no longer has any link to the economy.
What we really need in this country is affordable cash prices. International health insurance will cover people anywhere in the world, except the United States, because of singularly super expensive prices.
If we outlawed insurance, the doctors would be broke. Risk mitigation is probably the biggest problem that this country has.
For a market to work it must have clear lines of cause and effect. If people feel healthcare is too expensive, in a market economy they would be allowed to shop around to find cheaper alternatives. Insurance and government regulations create a wall that isolates cause and effect. Doctors will not quote a medical procedure…they will barely quote an office call rate. Hospitals are the same. The funny thing is they know EXACTLY how much the insurance will pay for any given procedure, but they tell me the AMA has deemed it price fixing to disclose or quote prices and the doctors defend it claiming that they have no way of knowing the costs before hand.
I have been building custom furniture for thirty years and never have I had a client willing to simply pay whatever it cost. Most times I can only guess at what my cost will be yet I MUST quote a fixed price. I do better on some that others but we live by the averages, and there is no reason on earth that a doctor or hospital can’t do the same.
WE must have pricing feedback for markets to work, but the reality is that most people don’t really want that. They don’t want to have to shop, to make decisions, and they surely don’t want to pay the full cost…just their deductible and an affordable monthly premium for the absolutely best healthcare in the world. I wish I could buy a car like that. I would drive my Bentley everywhere at an affordable $250/month.
The really sad part is that people go bankrupt every day for all kinds of stupid things, but the one thing that seems the most intolerable is going broke over healthcare…over saving our stupid lives. For some reason we think that should be affordable, but a 60k pickup…that’s okay.
If “the doctors” would be broke, other doctors would take their place.
There’s no benefit to outlawing anything. At least not anything not mentioned to Moses at Sinai. Just as there is no benefit to mandating anything.
Failure to observe both of the above, is why we’re now at the point where Isis taking over everything, would be pretty much a wash.
One more step into a collective utopian nightmare. So, we go from Obamacare to Hillarycare.
Bottom line? Government will simply print universal healthcare.
Socialism is like toothpaste. Once it’s out of the tube, it can’t be put back. One incremental step at a time.
Trust me… “THEY” can do anything they choose to do. They just choose the slavery route.
I suspect that insurers thought that mandatory health insurance would benefit them the way mandatory auto insurance has benefited auto insurers. High deductibles, high premiums and anti-social customer service were strategies in this charade. However, what everyone forgot is that a majority of US adults have nothing to do all day except consume services. Oops.
It’ll benefit them, They just need to throw an occasional tantrum, like this latest one, to get their way.
As has been mentioned by others, the kicker is the subsidies. That way, those who have nothing left for the banksters to steal, can be reliably corralled and counted on to support the system, as the system increasingly fleece those few who still have a few shekels left on the banksters behalf.
It’s the same trick that has been demonstrated to successfully work with progressive taxation. If you have nothing to contribute to the banksters yourself, you can still be made useful, by being encouraged to support theft from those who still have something.
That’s what government is about. That’s all government has ever been about, in fact. And ever will be.
All the Govt has to do is create a Medical Reserve Board ala the Fed, and keep ACA afloat with the same type of rigged market (debt) at taxpayers expense.
It’s about time
Here’s a bigger question: Once United drops the freeloaders, will the premiums for the rest of us go down?
How many jobs will be lost at health insurance companies as they exit ObamaCare? 10%
The core principles of insurance are based on the RISK OF LOSS and the LAW OF LARGE NUMBERS in order to develop actuarily sound premiums that are affordable while maintaining solvency (and hopefully profitability) for the insurance companies that offer coverages. In order for those principles to be achieved there MUST BE SOUND UNDERWRITING AND EXCLUSION OF GUARANTEED AND CATASTROPHIC LOSSES or else insurance premiums would not be affordable and insurance companies would not be able to MAINTAIN SOLVENCY as they are required to do by all state laws which regulate all classes of insurance.
The ACA violates the core principles of insurance which would result in extreme ADVERSE RISK SELECTION where those with guaranteed losses flock to obtain coverages which would very rapidly render all medical expense insurers INSOLVENT.
The ACA is really just a COST SHIFTING MECHANISM from those with losses to a third party. If that third party were the US government, then that would be a different story. Unlike the federal government, insurance companies are NOT A BOTTOMLESS PIT OF LOSSES and cannot be for a variety of reasons, not the least of which is that they are not allowed to be by state laws regulating insurance companies which require SOLVENCY at all times.
This Atrocious Care Act nonsense is the biggest boondoggle in US government history and will not survive for a huge variety of reasons.
There is no way that the ACA can remain. The Achilles heal is the the MASSIVE LOSSES IMPOSED ON MEDICAL EXPENSE INSURERS who cannot and will not continue to offer medical expense coverages. I think that was the intent in the first place in order to force a “single payer system” and drive the medical expense insurers totally out of business. The only other explanation would be TOTAL IGNORANCE OF INSURANCE PRINCIPLES by those who wrote the legislation. Either way, the result of NO MEDICAL INSURANCE AVAILABLE will rapidly be the same.
Insurance companies that offer medical expenses coverages are the BIGGEST LOSERS with this debacle and will soon be WITHDRAWING ANY AND ALL MEDICAL EXPENSE COVERAGES FROM THE MARKET and shutting down medical expense insurance operations as they will be have no choice but to do so as they would be RENDERED INSOLVENT if they continued to offer coverages.
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