Last year, UnitedHealth reported a projected loss of $650 million in 2016 on the health insurance exchanges formed under the ACA. Now, the company announced that it would exit a few state marketplaces next year, setting off a disturbing trend of insurers pulling out of HIEs. UnitedHealth’s loss in 2015 was $500 million.
The largest health insurer in the country, UnitedHealth weathered through dropping revenues in 2014, which was the first year the exchanges operated. Around 800,000 out of the 12.7 million health insurance exchange plan enrollees have a UnitedHealth exchange plan. Those still enrolled will not be required to select another plan during the open enrollment period in 2017. The HIEs are a fairly small part of UnitedHealth’s portfolio.
UnitedHealth’s rival insurance company, Humana, is also among the ones considering moving out of the exchanges next year. The company is likely to raise premiums to get revenue up, and to recoup financial losses. Humana is currently working to merge with Aetna.
For insurers, the challenges arising from HIE participation are mostly due to an unfavorable patient mix, and beneficiaries failing to pay their premiums for the whole year. The government is working to boost enrollment numbers both overall and among the younger population. Another goal is to step up the shopping experience at these marketplaces through the implementation of a star-rating system, and the creation of a standard plan that would have the same cost sharing benefits for different consumers, as well as better information about these components.
One more issue for insurers has been the lack of payment, which they are owed under risk adjustment. The risk corridor program specifically is underpaid at the rate of twelve cents for every dollar owed to insurers in 2015. Larger companies had capital reserves to take that sort of losses for a short while. Meanwhile, nonprofit CO-OP startups had no such luxury, and half of them consequently closed in 2016. The premium rates for the year had already been locked in by the time the funding shortfall became obvious, which means they will have to raise premiums next year to compensate.
The administration attempted to offset the risk corridor shortfall through reallocating money from another RA fund, the reinsurance program. However, based on the structuring of the program, most of that money should go to the U.S. treasury instead of being paid to insurers. Many members of Congress have the feeling that these payments are a way for insurers to bail out.