UnitedHealth Exits Obamacare Exchanges

UnitedHealth is exiting Obamacare exchanges in an estimated 34 states before the end of this year. Although the change will affect an estimated 795,000 people, it is just over 7 percent of the 11 million current exchange enrollees.

According to Forbes, the decision was sparked by “hundreds of millions” in reported losses. UnitedHealth CEO Stephen Hemsley suggests Obamacare simply cannot sustain itself, as it remains decidedly unstable.

The instability is blamed on an extraordinary number of late enrollees and numerous loopholes, which allow individuals to enroll and unregister at will.

According to the Federalist, the non-traditional participants are paying fewer premiums and filing more claims because they are permitted to enroll when they need medical care and unregister when the crisis has passed.

“The only way to keep the cost of insurance down… is for enough healthy people to sign up and pay their premium, which offsets the cost of caring for older and sicker enrollees whose premiums don’t cover the full cost of their care… As premiums rise, more of those healthy people decide they don’t want to pay expensive premiums, so they drop out.”

UnitedHeath contends Obamacare has cost the company, which is America’s most prominent health insurer, nearly $1 billion in the last two years. In 2016 alone, the company is expected to lose more than $600 million. The monumental loss ultimately forced the company to increase their premium deficiency reserve.

As the situation is unlikely to improve, UnitedHealth is exiting Obamacare in an estimated 34 states, including Arkansas, Georgia, and Michigan. However, the company is exploring options to continue participation in a “handful of states,” including Virginia, which have incurred fewer losses.

Los Angeles Times reports Leerink analyst Ana Gupte expects the losses to continue for many insurers. However, a temporary tax deferral, which will be enacted in 2017, is expected to offset a portion of the deficit.

In Gupte’s opinion, the ongoing issues, and UnitedHealth’s decision to exit Obamacare, may encourage federal regulators to reexamine previously suggested mergers, including Aetna with Humana. The proposed “mega-insurers” are expected to reduce Affordable Care Act costs and could provide a more stable environment in general. However, the regulators remain skeptical at this time.

Forbes offers two solutions to reduce the continued losses.

The first suggestion is to deregulate the markets and allow participants to choose their own health coverage. However, it is unlikely to happen because President Barack Obama is vehemently opposed to easing regulations.

The second option would be to close the loopholes that allow participants to opt in and back out of Obamacare at will. However, strict mandates are unlikely to be approved by the current Republican-controlled Congress.

Non-profit insurance providers, including BlueCross, are not held accountable to shareholders. However, they are contending with the same losses reported by UnitedHealth.

It is clear that at least some insurance providers, including both for-profit and non-profit companies, are experiencing exceptional losses due to their participation in Obamacare. Unfortunately, there are no clear plans to significantly reduce the burden.

Despite the apparent issues, including UnitedHealth’s decision to exit Obamacare, the Affordable Care Act has made some progress in providing insurance to disadvantaged Americans.

The New York Times reports the number of uninsured individuals in the United States “dropped by 10 million between 2010 when the law passed, and 2014.” Although the same article admits some serious concerns, the writer also points out “the law has helped millions of Americans,” including many who were previously unable to afford healthcare coverage.

The full impact of UnitedHealth’s decision to exit Obamacare may not be fully realized until 2017, when participants will have one fewer option for their healthcare provider.

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