Editorial: Defections make Obamacare weaker

The Detroit News

UnitedHealth Group announced unsurprisingly last week that next year it will pull out of the Obamacare exchanges in Michigan and most of the states in which it is operating. It’s the latest casualty in a growing list of failures for the 6-year-old signature health care law and a reminder that big government dreams still face market realities.

The decision threatens competition in the health care marketplace, which would mean fewer options for patients.

The company was straightforward about the problems it experienced with the system that eventually pushed it to leave. UnitedHealth was hemorrhaging money from participating in the exchanges — projecting $650 million in losses this year. It lost $475 million in 2015.

United’s CEO Stephen Hemsley said the market for the exchanges hasn’t matured quickly enough and that enrollment growth continued to lag. He also pinned the company’s exit on the fact that Obamacare essentially has become an expensive risk pool that skews toward older and less healthy patients. It lacks the young, healthy patients needed to buy overpriced plans to subsidize everyone else.

Just last month, the Blue Cross Blue Shield Association, whose members are the largest players in the exchanges, reported that Obamacare clients consume on average 22 percent more care than those with employer-based coverage.

Additionally, enrollees tend to enter the pool only before incurring large medical expenses. The system offers special enrollment periods to target these types of customers.

United’s CEO calculates customers who sign up in these windows are 10 percent more expensive than those who join during other times, and they’re 40 percent more likely to drop their plan later.

But United’s problems aren’t unique among insurance carriers participating in the exchanges, which means more exits could be coming.

A McKinsey & Company report on insurers’ 2014 performance in the market found most — more than 70 percent — had negative margins. In 41 states the average profit margins were negative. That’s even after the government gave subsidies to carriers.

United didn’t offer the most competitive insurance packages, and only accounted for 6 percent of exchange enrollments. But the Kaiser Family Foundation notes that without United’s offerings, 2016 premiums would have been 1 percent higher.

United offered service in seven Michigan counties, and in none was it the most affordable option. But if United left all the state exchanges, three million enrollees would have only one or two insurers left to choose from next year.

The Obama administration has downplayed UnitedHealth’s decision, arguing the insurer is a relatively small player and wasn’t pricing its coverage competitively.

“We have full confidence, based on data, that the marketplaces will continue to thrive for years ahead. The number of issuers per state has grown year-over-year,” said Health and Human Services spokesman Ben Wakana in a statement last week.

Obamacare has failed to deliver on its promises since it was rolled out, and yet Democratic presidential candidates want to further broaden government control of the nation’s health care system. Instead of an expansion, this is a law that demands an overhaul before it reaches a crisis point.