United Healthcare Says Yes to Health Insurance Exchanges
UPDATE: November 2015 - Just weeks after saying they saw the health insurance exchanges as being a strong growth market, and indicating they would participate on health insurance exchanges in eleven more states for 2016, United Healthcare (UNH) caused a stir among those who don't follow the health insurance industry closely by saying that they were not making as much money as they had hoped in the individual marketplace and that they might reduce the number of exchanges they participate on in 2017.
The initial reaction on Wall Street saw health insurance stocks tumble, but they soon recovered as a closer look at the numbers and the industry in general indicated the following:
- UNH has never been a big player in the individual market; historically it makes its money through employer-sponsored plans.
- During the initial exchange rollout, UNH did not participate; consequently, it has had to "buy" business by undercutting its competitors' pricing, thereby cutting into its own profitability. Even with charging lower premiums, UNH has only captured ~6% of the exchange-based market.
Major players in the individual market (Anthem and Aetna) responded to the UnitedHealth story by stating that the exchanges have yielded profitable growth for their companies and reiterating the view that they expect the exchanges to provide major growth opportunities in the future.
These insurers also stated that it is way too early to talk about quitting on the exchanges.
The conflicting statements issued by the UnitedHealth executives have some on Wall Street speculating that UNH may be lowballing estimates in order to create an earnings surprise, while others wonder if UNH is deliberately trying to drive customers away. We'll be interested to follow this story and see how the next year plays out.
UPDATE: October 2015 - Recent reports indicate that United Healthcare will be participating on health insurance exchanges in eleven more states for 2016. This is not surprising to us, as we always have felt the ACA would be profitable for health insurers and that the internet-based exchange marketplaces can be a cost effective way for insurers to reach new consumers.
December 2014 - After largely taking a pass during the first year of the Affordable Care Act's (ACA) health insurance exchanges, the nation's largest health insurer has decided to participate heavily in year two. A November 14th report from BusinessWire indicates that United Healthcare will be offering exchange-based plans in the following 23 states: Arizona, Alabama, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Louisiana, Massachusetts, Maryland, Michigan, Mississippi, Missouri, New Jersey, Nevada, North Carolina, New York, Ohio, Pennsylvania, Rhode Island, Texas and Wisconsin.
In addition, the state of California is allowing United Healthcare to participate on a limited basis in that state. Typically, California has a longer waiting period for insurers who stop writing in the state, but will be opening up some rural parts of the state, mostly in northern California, in order to provide residents in those areas with more competition.
All of this is good news for those who believe that competition will provide consumers with more choices and lower prices. This market-based philosophy is the reason that the Republican Party originated the ideas incorporated within the ACA: universal health insurance delivered through private carriers, and incorporating the individual mandate. Now if we can just get the GOP to stop trying to eliminate the ACA and work to improve it, we may really be on to something.
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