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Co-Ops fail, United pulling out of Exchanges; ACA’s death knell?

The demise of many co-ops and United Healthcare’s threat to pull out of the Exchanges due to some $700 million in past and forecast losses has generated more speculation that ACA, the Exchanges, and health reform in general are in dire straits.

Deep breath here, folks.

First, historically United has not been known for expertise – or much interest – in the individual marketplace.  Afer entering the Exchange markets late, it was operating in about 60% of the rating areas, an indication that the huge insurer jumped in to the market belatedly and then with both feet.

Second, United’s “big” losses are an estimate – UNH reported it lost around $500 million on ACA plans in 2015 (although it’s a bit early to come up with any number) and, depending on which source you read, is predicting it will lose hundreds of millions more this year. Given the huge insurer’s inability to predict financial returns on the front end, I’d suggest that these current predictions be taken with the proverbial grain of salt.

Third, the dominant low-cost insurers in the vast majority of health insurance rating regions are either Blues plans or Medicaid managed care organizations.  So, while the Co-Ops Rubio-induced failure is a major issue, it by no means is a harbinger of system-wide collapse.

Remember, the health care financing and delivery system accounts for 17% of our GDP.  It is going thru huge and wrenching changes, changes that mimic what we’ve seen in manufacturing, heavy industry, shipping, commodity production.  If anyone thought this was going to be smooth, simple, easy, and predictable they were naive beyond belief.

Change is always destructive for some, an opportunity for others, and unpredictable at best.  The genius of our economic system is that smart, adaptable, well-positioned companies will survive and thrive.

So, let’s not get too upset about United’s theoretical $720 million loss.  That accounts for  a whopping 0.42% of the company’s total revenue of $167 billion.

And, United’s departure from Exchanges opens opportunity for other health plans.

What does this mean for you?

Opportunity favors the prepared, and change is opportunity.

3 thoughts on “Co-Ops fail, United pulling out of Exchanges; ACA’s death knell?”

  1. Up until this morning I generally agreed with your comment here. This morning I have read that Anthem has told analysts that it is not achieving its hopes for the exchange markets it is involved in and also indicating a slow uptake on private exchanges. Anthem also says it is seeing fewer “customers” from its exchange activity than it had hoped for. Finally, Anthem says that premiums on the exchanges are generally underpriced. Before I read Anthem’s remarks I generally agreed with your assessment – but if a large Blue, with by far the largest share of the Covered California market in most of the state and a dominant position in several other states expresses concern about the exchange markets it may be a more serious threat than we thought.

  2. Has there been any news about insurer’s getting into the exchanges? If we took score of insurer’s getting into the market or offering new plans what would the score be vs. insurer’s getting our or reducing plans? Appears the news is about getting out. I am just looking at it the other way. Is anyone getting in???

  3. What ever happened to offering a public option on the exchanges? The large insurers constantly make threats about leaving the exchange due to lower enrollment. I don’t believe they will be going anywhere as long as millions have to carry insurance.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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