News: CJ Exclusives

Analysts: United Healthcare’s Exit From N.C. Obamacare Exchange Ominous

'Death spiral' possible as fewer insurers will provide coverage to Obamacare patients.

Concerns about a potential Obamacare death spiral and rapidly escalating insurance premium costs reignited with Tuesday’s announcement by UnitedHealthcare, the nation’s largest insurance company, that in 2017 it would pull out of most of the nation’s health exchanges — including North Carolina’s.

Since Blue Cross and Blue Shield of North Carolina has not ruled out cutting its losses by exiting the Obamacare marketplaces in 2017, United Health’s announcement is particularly significant here. BCBSNC says it has lost $400 million on its Obamacare plans in 2014 and 2015.

UnitedHealth’s decision “leaves North Carolina with just two companies offering plans to people who do not get health insurance through their employer,” said Katherine Restrepo, health and human services policy analyst at the John Locke Foundation.

It also means “one-quarter of the state’s exchange enrollees [155,000 policyholders] will be left with just one insurance carrier to purchase health insurance from starting next year,” Restrepo said. The only other company selling plans in UnitedHealth’s territory is BCBSNC. It services all 100 counties in the state. Aetna, which recently purchased the state’s other exchange participant Coventry, also offers plans on the exchange but operates in only 39 counties.

“I am disappointed UnitedHealthcare made the business decision to leave our individual health insurance market, and I remain concerned about North Carolinians’ access to quality, affordable health care coverage,” said state Insurance Commissioner Wayne Goodwin.

“Clearly, there is much work to be done by Congress and our state legislature to better protect consumers and rebuild our private health insurance market,” Goodwin said.

Goodwin wrote to U.S. Health and Human Services Secretary Sylvia Burwell in February expressing alarm that burdens of the Affordable Care Act have caused insurers to drop plans, giving consumers fewer choices.

“Aside from confirming that we are exiting the individual exchange market in North Carolina, we are providing no additional comment” on why the company is leaving, UnitedHealthcare spokeswoman Maria Gordon-Shydlo told Carolina Journal.

But Gordon-Shydlo provided a statement UnitedHealth Group shared during its Tuesday earnings call with investors saying that the company has been evaluating the public exchanges on a state-by-state basis, and had regular public dialogue with shareholders since November about its unfavorable experience and performance in those markets.

“The smaller overall market size and shorter-term, higher-risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis. Next year, we will remain in only a handful of states, and we will not carry financial exposure from exchanges into 2017,” the statement said.

“We continue to remain an advocate for more stable and sustainable approaches to serving this market and those who rely on it for care,” the statement read. No other details were released “out of respect for our state partners.”

Obamacare plans are bleeding enormous sums of money because claims costs are outpacing premium revenue, Restrepo said. The insurance companies must accept people with expensive, pre-existing health conditions, while other policyholders are signing up, receiving expensive treatments, and then dropping their plans.

“When Obamacare’s exchanges opened for business in 2014, insurance companies knew they were in for an initial financial hit,” Restrepo said. To limit their resistance to participating in the exchanges, the federal health law offered insurers temporary subsidies to offset some of the costs.

“But even with these funds, the losses are still pretty significant. Experts are now saying that insurers won’t be enjoying balanced risk pools — where enough young and healthy enrollees will offset the costs of expensive enrollees — until 2018,” Restrepo said.

“We have not made any decisions about participating in the ACA in 2017,” BCBSNC spokesman Lew Borman said on Wednesday.

“We will make a decision by late summer. We are evaluating the sustainability and affordability of any plans we offer our customers for 2017,” Borman said. “All options are on the table – from maintaining the status quo to withdrawal.”

He declined to comment on whether United Healthcare’s decision would influence BCBSNC’s deliberations.

“I have no concern about them leaving the market,” Mandy Cohen, the chief operating officer of the federal Centers for Medicare and Medicaid Services, told The Hill newspaper in a story published last week regarding CMS conversations with BCBSNC.

“That is a very confident pronouncement,” Michael Cannon, director of health policy studies at the Washington, D.C.-based Cato Institute, told CJ. If Blue Cross does pull out, “CMS would have serious egg on its face.”

In a Forbes.com blog post published Tuesday, Cannon wrote: “Obamacare hasn’t yet collapsed in a ball of flames. But UnitedHealth’s withdrawal from Obamacare’s exchanges is more ominous than the administration wants you to know.”

UnitedHealth’s sicker, costlier exchange members now will buy plans with other companies, increasing those insurers’ costs, and requiring them to increase premiums, Cannon wrote. If costs become unbearable, and premium increases aren’t approved, those insurers will exit the exchanges.

“The law is literally rigged to create a race to the bottom. That’s why so many carriers are offering plans with high cost-sharing and narrow networks,” Cannon wrote.

“Here’s the largest health plan [that] maybe has the best fiscal outlook, and [its executives] have decided it’s not worth it for them to be in the exchange,” Twila Brase, president and co-founder of Minnesota-based Citizens Council for Health Freedom, said of UnitedHealth’s decision.

“If I had my druthers, this exit from most of the exchanges would be the beginning of a tsunami of exits from the exchanges, allowing healthcare.gov to essentially implode,” Brase said.

The Obamacare exchange mostly is “a glorified, very expensive way of signing people up for Medicaid, and an expanded version of Medicaid called Obamacare, which is sort of sliding-fee-scale Medicaid,” Brase said.

She believes a better alternative would be for Congress to reauthorize the sale of high-deductible, catastrophic insurance policies that are prohibited under Obamacare, and eliminate the coverage mandates and the ban on excluding patients with pre-existing conditions. Those changes would make insurance more affordable, she said.