As the UnitedHealth Group Inc. (NYSE: UNH) leaves by 2017 most of the Affordable Care Act exchanges, experts said this would have as a consequence fewer choices for some buyers across the nation, leaving at least three states with only one insurer to choose from.
The largest insurer in the U.S. announced last month that it will be reducing its exchanges in 34 states due to the lack of revenues from the marketplace. The company expects to lose this year about $650 million for the exchanges, as reported by the Washington Post.
According to a report from Kaiser Family Foundation, the complete departure of the company would mean that about 1.1 million people in the exchanges would have just one option for an insurer because no other company has rushed to fill the gap. The impact among the states can vary, some rural areas and the Southern states will have the greater issues.
However, the report also stated that most of the states would still have the ability to choose between three or more insurers if the UnitedHealth decided to exit all exchanges across the country. In addition, according to the study, the average health plan used a benchmark would be about 1 percent more expensive with the company’s departure, which is not such a big difference.
“I do not know what a ‘handful’ means, but it does sound like a pretty big pullout,” said Gary Claxton, a vice president at the Kaiser Family Foundation, referring to the uncertainty of the states where the UnitedHealth Group is keeping the exchanges. “But since we do not know which markets it is, we know some of them but we do not know many of the others, we do not know how big a deal it is in terms of competition,” he added.
The biggest problem for insurers
The biggest problem with exchanges is the lack of balance on the healthy and the sick. The insurance business needs to have healthy consumers who pay their membership so the company can afford to pay the medical bill for their not so healthy ones.
The fact is that with the Affordable Care Act, patients can access coverage with previous medical conditions, which is a good thing for them, but opens up the opportunity for people to wait to get sick to look for coverage. Sick patients have increased while the healthy ones have stated the same and this offers a problem for insurers to retain revenues.
Another problem with the law is that even though it provides an annual enrollment window for several week so people can enroll or change coverage, the law also admits the enrollment outside that period if their insurance needs changes like a new address, a spouse or a child to add, among other exemptions.
Those exchanges do not require any paperwork like birth certificates or marriage licenses to prove the legitimacy of the change. Insurers have said that this situation leaves them vulnerable.
A case that has been an example of such vulnerability is when the Montana Health Co-op had a severely ill customer in a hospital sign up for its coverage in October and then drop a $250,000 bill for the company. Further investigation led to finding that the reason for the special enrollment was that the patient changed ZIP codes.
Source: Kaiser Family Foundation