New ObamaCare angst as top insurer threatens to bail – The Hill
A threat by the nation’s largest health insurer to pull out of ObamaCare is a sign of the industry’s growing angst about the viability of the federal exchanges, sources close to the industry say.
UnitedHealthcare’s warning sent new shockwaves across the healthcare sector after weeks of mounting anxiety among private insurers whose participation in the exchanges is critical to the viability of the president’s signature law.
In the last month alone, insurers have learned that the Obama administration has significantly lowered its expectations for new customers and will have far fewer federal dollars to help cushion insurer losses.“We’ve been very clear with the Administration about the serious challenges facing consumers and health plans in this exchange market,” Marilyn Tavenner, the CEO of the powerful insurer group America’s Health Insurer Plans, wrote in a statement. Leading insurers have already given strong warnings that the Obama administration needs to step up its funding commitment for companies that are still struggling with less-healthy — and therefore more expensive — customers. Some believe that Thursday’s announcement by UnitedHealth could be an attempt to pressure the administration into action.
“All of the challenges they cited are real challenges and all insurers across the board are feeling as well,” one source within the insurer industry said.
Experts say it’s the clearest sign yet that ObamaCare exchanges remain weaker than expected after two years. It’s also the latest warning from an industry that has been deeply dissatisfied by the Obama administration’s rollout of the law since the beginning.
“I think [UnitedHealth] is legitimately thinking that things are — the risk pool itself — is worse than we thought. We’re beginning to hear that a bit more,” said Joseph Marinucci, a senior analyst with Standard and Poor. “There are still some open questions here. They still lack a measure of maturity.”
The warning feels abrupt, coming less than a month after UnitedHealthCare projected solid growth in its ObamaCare plans. But it’s also the culmination of a month of bad news for the healthcare law.
In a call with shareholders Thursday, UnitedHealthCare CEO Stephen Hemsley said the company was lowering its profit expectations by several hundred million dollars as a result of the grim outlook of ObamaCare plans. He said the company was taking a “proactive step” to halt the company’s marketing of ObamaCare plans next year, and would evaluate whether to participate at all in 2017.
“As we see those markets actually being sustainable, we would be open to participating in them,” Hemsley told investors, stressing that the company did not want to continue losing money. “We cannot sustain those kinds of costs and losses, and we will evaluate the marketplace as it goes.”
The announcement — less than three weeks into this year’s open enrollment — sent shockwaves across the marketplace. Within hours, stocks for major providers and hospital groups nosedived and multiple industry analysts began predicting a domino effect among other insurers.
“I think everyone is looking at this, like, ‘Ok, here’s a big guy pulling out. If anything they could have sustained these challenges and these losses, and they’re not going to do it,” the industry source said.
“Throughout the next year, companies will be looking to reposition. There will be shakeout, no question,” Marinucci, the S&P analyst, added.
Hemsley’s remarks are a reversal from the company’s expectations given with shareholders just last month. But during that time, federal health officials announced a major blow to an ObamaCare program known as “risk corridors,” which was designed to serve as a cushion for insurers facing larger-than-expected costs.
Insurers’ demand for that pool of money has far exceeded the available funds, in large part because companies have contributed less to the program.
As a result, the Obama administration can pay out just 13 cents of each dollar that it owes insurers — threatening every insurer with plans on the marketplace, but particularly those with smaller reserves.
Congress has the power to address that shortfall, but GOP leaders have expressed no interest in authorizing more funding.
When making its projections on Thursday, UnitedHealth specifically cited the lack of federal funding available in the risk corridors program — the same problem that has contributed to the collapse of 11 startup state insurers known as “co-ops” in the last several months.
UnitedHealth also pointed to the tempered enrollment expectations from the Obama administration. Officials are hoping to sign up only 900,000 new customers this season, reaching a total of 10 million by next year.
The Obama administration has pushed back against the sharply worded statements from UnitedHealth.
“Today’s statement by one issuer is not indicative of the Marketplace’s strength and viability,” spokesman Ben Wakana said in a statement.
Others within the healthcare sector shared the administration’s view, chocking up the warning as a natural symptom the industry’s adjustment to the sweeping law.
“American health care is undergoing significant change and evolution, and the health exchanges are part of that disruption,” said Bernard J Tyson, Chairman and CEO of Kaiser Permanente, a non-profit. “While there have been challenges at times, we believe at the end of the day they are causing healthy disruption, and are forcing the health care industry to respond better to consumer needs.”
Tim Jost, a professor of healthcare law and longtime ObamaCare supporter, added that UnitedHealth, in particular, has been cautious about the exchanges all along.
“I don’t think it’s a disaster,” he said, noting that the insurer largely stayed out of the market in the first year and has come out of the exchanges in several states last year.
He pointed out that only a “very small chunk” of UnitedHealth’s customers are on the exchanges — about 1 million of 50 million. He added that some movement of insurers is expected in the early years of a marketplace restructuring.
While other insurers have pulled out of ObamaCare plans because of financing concerns, UnitedHealth would be by far the largest.
“They come and they go. There’s probably more going than coming, but it’s not the end of the game yet,” he said.