UnitedHealthcare Bails Out of Obamacare: What Does It Mean

UnitedHealth Group’s (NYSE:UNH) decision to exit the Affordable Care Act exchanges comes after months of pressure from Republican lawmakers and President Donald Trump. The company announced its departure last week, saying it would no longer sell coverage through HealthCare.gov or any other state exchange starting Jan. 1, 2018.

The move was met with disappointment by many consumers, who had hoped to keep their current policies. But the company’s announcement didn’t come out of nowhere. UnitedHealth Group faced criticism from both sides of the political aisle over its participation in Obamacare before it decided to pull out. A few years ago, the insurer was one of several major players that were part of a coalition called “Coalition Against Insurance Rate Hikes.” That coalition, which included Blue Cross Blue Shield Association and Humana (NYSE:HUM), lobbied against the individual mandate that required all Americans to have health insurance or pay a penalty.

In addition, UnitedHealth Group faced criticism for charging higher premiums than competitors like Anthem (NASDAQ:ANTM). Many consumers complained about those rates and the fact that they weren’t transparent about how much money they spent on marketing and advertising compared to actual medical costs.

The decision to exit the exchanges has its benefits as well. Not participating allows UnitedHealth Group to avoid paying a $475 million penalty under the ACA’s “risk adjustment” program. This is a system run by the government that collects money from insurers with lower-risk consumers and redistributes it to companies with higher-risk enrollees. In theory, it’s supposed to create a balanced market by spreading risks evenly.

But it has not worked as planned for several insurers.

The exit by UnitedHealth Group won’t be felt as much in some states as others. The company only offered individual plans in 30 states in 2017, and pulled out of 10 of those this year. In other words, it was already narrowing its presence in Obamacare from the start. But that still leaves about half of the country with no current UnitedHealth Group exchange presence at all next year.

Which states will be most affected?

According to Kaiser Family Foundation data, Alaska is the only one where United is the only option next year for consumers who don’t get insurance through their employer. The other nine states with just a single insurer are currently served by just one or two insurers.

It’s too early to tell how this will play out, and there are a lot of unknowns. But it’s clear that UnitedHealth Group’s exit could have a big effect on the ACA, at least in some states.

For the consumer, the most important thing is to shop around for 2018 coverage. If you get your coverage through your job and nothing changes there, you’re fine. But if you’re on the exchanges, it’s time to see what your options are for next year. You can do that by visiting Healthcare.gov or using the exchange finder on The Huffington Post’s “Trumpify” app.

Also read:

Who Is Most Affected By The Obamacare Repeal?

5 Things That Could Derail Obamacare Repeal

Obamacare Repeal Means Higher Costs For Many In Near Future

The Argument For Obamacare: What It Does

Also by Jesse Genet:

Why Is My Insurance So Expensive?

How To Save Money On Car Insurance

New York City Parking Tips And Advice

Jesse Genet has been working in the finance industry since she was sixteen years old and in her spare time, she writes about a variety of financial topics. She also writes for several business blogs and is working on a finance related novel.

Photo: Flickr: Ian Elliott CC License

Updated: 8/4/2017

Sources & references used in this article:

Institute for Policy Studies by S Anderson, S Klinger, S Pizzigati, J Rojo, R Hickey… – 2017 – courthousenews.com

The Effects of the Affordable Care Act on Health Insurance Executive Compensation Packages by N Peppler – 2016 – repository.tcu.edu

Capitalist care: Will the Coalition government’s ‘reforms’ move the NHS further toward a US-style healthcare market? by K Moody – Capital & Class, 2011 – journals.sagepub.com