Health Insurance

UnitedHealth to drop Affordable Care Act in most states

UnitedHealth participates in the Affordable Care Act in 34 states, where it provides individual health plans through online exchanges for government-backed medical care coverage.

The health carrier said the other day that it would exit Arkansas, Georgia and Michigan – after warning last November it might stop selling policies in states where it had been taking a loss.

State-based exchanges are a foundation element to ObamaCare.

UnitedHealth put last year's loss from ACA exchanges at $475 million. As well as on Tuesday, while reporting a better-than-expected first quarter, President Dave Wichmann said exchange losses around to date have previously amounted to $125 million.

The company added it ended the quarter with 795,000 public-exchange enrollees – a number it hopes to cut to 650,000 by December.

UnitedHealth, like several other insurers, has complained about states with too many unhealthy customers who, consequently, file unexpectedly high medical claims.

CEO Stephen Hemsley returned to that particular theme , calling small markets populated with high-risk enrollees a bad mix. “Our own experience and gratifaction happen to be unfavorable during these markets,” he said.

Wall Street applauded UnitedHealth's reduced resolve for ObamaCare, sending the stock up 2.1 percent, to $130.50.

Merrill Lynch analyst Kevin Fischbeck also praised the move, saying the insurer “has taken this volatile part of its business and apparently mitigated the near future earnings risk.”

ObamaCare represents a part of UnitedHealth's business, which mostly consists of providing medical coverage to huge numbers of people through their employers. However the company's retreat might be a blow to President Obama's mission to reform the health-care industry.

A study by the Kaiser Family Foundation found that if UnitedHealth exited from the 1,855 counties where it competes, 29 percent would begin to see the number of exchange insurers drop from two to 1. Another 29 percent would begin to see the number drop from three to 2.

More competition among insurers generally means lower premiums. But this is mitigated by UnitedHealth's reputation for not a low-cost provider.

“Even if this did price relatively low, it had been often not significantly lower than its nearest competitors,” the foundation said. “As a result, the consequence of United withdrawal nationally could be modest.”

More worrisome is industry consolidation.

Third-ranked Aetna reported in January that it expects to shut on its $37 billion purchase of Humana after receiving Justice Dept. approval this season. And second-ranked Anthem also awaits regulatory approval for its $54 billion purchase of Cigna.

Should both mergers undergo, the would go from five big players to 3.

And that will make ObamaCare even more vulnerable if another carrier also decides to depart.