UnitedHealth's Exit From ACA Exchanges Will Have a Modest Effect

The departure of UnitedHealth from most Affordable Care Act (ACA) exchanges will have a relatively small effect on premiums across the country, but the effect could be more pronounced in some markets, according to a study from the Kaiser Family Foundation (KFF).

UnitedHealth Group, the largest health insurer in the United States, announced that in 2017 it will exit most of the 34 states where it currently offers plans on the ACA insurance exchanges. UnitedHealth said it would remain in only a handful of states because of stated financial losses in 2016. The company has already said it plans to withdraw from the exchanges in Arkansas, Michigan, Connecticut, and parts of Georgia.

The recent analysis from KFF concluded that UnitedHealth’s participation on the exchanges had a relatively small effect on premiums as they were less likely to offer one of the lowest-cost silver plans. When it did offer a low-cost option, UnitedHealth’s pricing was usually not far from its competitors.

However, in some markets UnitedHealth’s departure could have a significant effect. If UnitedHealth departs from all areas where it currently participates and is not replaced by a new entrant, the effect could be especially significant in rural areas and southern states. The analysis also concludes that the national effect would be “modest” because UnitedHealth does not generally offer low premium plans in the exchanges, which are the most popular plans.

UnitedHealth has the lowest or second-lowest silver plan in 35% of counties where it participates in 2016, representing an estimated 16% of marketplace enrollees overall. According to the analysis, the national weighted average benchmark silver plan (the second-lowest cost silver) would have been roughly 1% higher in 2016 had UnitedHealth not participated—which would mean less than $4 per month for an unsubsidized 40-year old, according to Kaiser.

If UnitedHealth were to withdraw from all the states it currently participates in, the effects on competition would vary from state to state and even county to county depending on how significant a player UnitedHealth has been. KFF focused its analysis on places where UnitedHealth’s departure would leave consumers with just one or two insurers.

UnitedHealth participates in 1855 counties, representing 59% of all counties nationwide (an estimated 71% of marketplace enrollees). In 29% of counties where UnitedHealth participates, the company’s exit would cause a drop from 2 insurers to 1; in another 29% of counties where the company participates, there would be 2 exchanges as a result of its withdrawal. A total of 1.8 million exchange enrollees would be left with 2 insurers and another 1.1 million would be left with 1 insurer as a result of the withdrawal. Still, KFF notes, the vast majority of exchange enrollees (70%) would have a choice of 3 or more insurers even in the absence of UnitedHealth, KFF calculated.

The ACA marketplaces are still relatively new, the report notes, and as such, “premium changes and the exit of insurers that are not able to offer competitive and profitable plans is to be expected.”