As a result, UHG revised financial expectations for 2015, “reflecting a continuing deterioration in individual exchange-compliant product performance.”
CEO Stephen Hemsley said their mistake was getting into the Exchanges too soon, before things had a chance to settle down. UHG did not exactly jump into the Exchanges, in fact their Exchange enrollment is a rather modest 540k members out of UHG’s 47.4 million total enrollment. That’s just over 1 percent.
And, in some states, such as Illinois, things are looking pretty good.
Early on, UHG was quite cautious about the Exchanges. In 2014 UHG only participated in the individual market in one state where it paid into the risk corridor program (so it’s operations were profitable). Results were solid in the small group market as well; UHG participated in several marketplaces and overall lost less than $1,000 through the risk corridor underpayments – while paying into the program in several states.
There are two main considerations here; UHG-specific and Exchanges in general
My view: UHG is a national player that is not particularly well-positioned in many local markets and therefore has a tough time competing with the Blues. There are two key dimensions to this.
First, the Blues have better brand awareness than UHG on a national basis, and individual plans likely have even stronger consumer recognition in many local markets. While UHG is a huge player nationally, health care, like politics, is local. And no one does local better than the Blues.
Second, the Blues – provider relationship tends to be more collegial and less adversarial than the UHG – provider relationship. According to athenahealth’s PayerView, UHG’s commercial offerings rank 53rd out of all health plans reviewed, well behind many Blues plans. In fairness, UHG is strong in some markets, but overall Blues have better relationships with providers.
The latter point is also pertinent to the Exchange issue.
Payers’ success in the brave new world of health care will be driven by close cooperation between payers, providers, and members. Data sharing, management of potentially-expensive members’ health, and cooperation in marketing are all essential, and that’s where the Blues’ decades-long local relationships will pay off. Things can and often do get contentious, even when Blues are involved (see New Jersey…), and when they do the stronger and longer the underlying relationship, the more chance things will work out.
There’s another dimension to this; some critics including colleague and mentor Bob Laszewski have noted the impact of adverse selection on UHG’s results. Simply put, too many less healthy folks have enrolled to date, and not enough healthy ones. This will change over time as penalties for non-participation increase; 2016’s is $695 per person.
Yes, health insurance plans are too expensive. Yes, deductibles and member cost-sharing is too expensive for many. The inevitable result of the individual mandate combined with standardized benefit plans is narrow networks, lower health care prices, and aggressively managed member health.
It’s going to be messy and painful.
It’s also necessary to reform an industry that accounts for 18% of our GDP while delivering a product that is often low quality.