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UnitedHealth Group, one of the nation’s largest health insurance companies, announced yesterday that it is leaving the Obamacare exchange marketplace. (here) The company did business in 34 states last year, including the Small Business Health Options Program (SHOP) in Washington state. This leaves Washington’s SHOP exchange without a state-wide insurance company. Kaiser has a very small part of the market, but only in Southwest Washington.
We wrote last month that nation-wide Blue Cross and Blue Shield Companies are assessing their options and considering leaving the Affordable Care Act (ACA) exchanges. (here) The exchanges don’t make financial sense for an insurance company, since the majority of enrollees are older and sicker individuals. Young and healthy people are willing to go without health insurance and simply pay the fine, or “tax.”
The financial structure for an insurance company doesn’t work if there are not enough healthy people, who don’t use health care, to offset the sicker individuals who do need care. UnitedHealth’s move confirms the perverse incentives created by Obamacare.
UnitedHealth is a national, multi-billion dollar company and the exchanges were only a small part of its overall business. However, the company’s reasoning is still valid – it makes no sense to continue a program that loses money. Interestingly enough, UnitedHealth is already starting to diversify out of the insurance industry. Over 40 percent of its revenue now comes from its Optum consulting and analytics unit.
The central-planners who designed Obamacare made a number of assumptions. One of the most critical was that the individual mandate would force healthy people to sign up for expensive health insurance that they didn’t want or need. This is not happening and puts significant parts of the Affordable Care Act at risk.
