The announcement of Obamacare's robust enrollments in the first two-weeks of its 2016 roll-out have been tempered a little bit by another announcement: UnitedHealth lost $425 million on Obamacare policies and might decide to pull out of the exchanges entirely. It has about five percent of that market (and huge, very profitable employer-based and Medicare Advantage markets, so don't shed too many tears for it). What does that mean for Obamacare as a whole? It reflects the built-in problems of a system based on private insurance, but does not portend the system's demise.
The problem for UnitedHealth is that they underestimated how much it would cost to cover new patients when setting initial premiums—the people who signed up were more expensive than they foresaw. But, and this is kind of a big one, other insurers aren't panicking and aren't pulling the plug on Obamacare.
Blue Cross and Blue Shield companies are the dominant insurers in the market for individual health insurance in most states, and their participation in the exchanges is strong. Three of UnitedHealth’s for-profit competitors—Aetna, Centene, and Molina—told the Swiss financial services company UBS on Thursday that they remained confident about their exchange business, even considering short-term financial pressures.
Bernard Tyson, CEO of Kaiser Permanente, vowed to stay the course in a written statement. "American health care is undergoing significant change and evolution, and the health exchanges are part of that disruption. While there have been challenges at times, we believe at the end of the day they are causing healthy disruption, and are forcing the healthcare industry to respond better to consumer needs," Tyson said.
Additionally, "the average number of companies selling insurance on the marketplaces in each state rose from eight in 2014 to nine this year, and will be 10 next year, according to the Department of Health and Human Services." Companies are still seeing this as potentially good business, which makes sense because from here on out, the people signing up should be healthier. That's because higher penalties under the individual mandate are going to start kicking in, which should bring people who've been healthy enough to skate along without insurance into the system.
It's still too early in the law's implementation, Jon Kingsdale, a director of Wakely Consulting and former director of the insurance exchange in Massachusetts, says, to declare Obmacare in trouble. "In general, the plans just figured out their 2014 experience, and are still trying to predict where individual premiums will settle out, so there’s a lot price movement—up and down—and too much uncertainty for some players." He adds that "the news about United does not presage a death spiral," because there are too many factors—like the subsidies that keep insurance affordable for millions even as premiums rise—that will keep customers in the markets.