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View: No, UnitedHealth doesn't spell the end of Obamacare

Commentary November 20, 2015 at 06:44 AM
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(Bloomberg View) — UnitedHealth Group Inc. (NYSE:UNH), the country's largest health insurer, says it might stop selling plans on state insurance exchanges, citing higher-than-expected costs.

This news would be mostly unremarkable except for the fact that those state exchanges are part of the Patient Protection and Affordable Care Act (PPACA), or Obamacare, and it doesn't take much to get people hyperventilating about the imminent death of Obamacare and speculating about its ramifications for the 2016 presidential campaign. Sorry to disappoint, but UnitedHealth's decision — which is tentative — doesn't mean much. The company covers less than 6 percent of the exchange population; if it does pull out, those people will be able to get other coverage.

The only way this would matter to the future of the exchanges would be if other insurers were to follow UnitedHealth's lead. While that's possible, it's unlikely, because the three biggest players — Aetna (NYSE:AET), Anthem (NYSE:ANTM)and Humana (NYSE:HUM) — depend on the exchanges for more of their business, according to data from Bloomberg Intelligence, and have so far shown no signs that they want out.

See also: PPACA earnings messages: Anthem, Assurant and more, Humana may slash individual health operations and Moda shrinks, Aetna rises, analysts watch

UnitedHealth, by contrast, has always been lukewarm about the exchanges. The company stayed out in 2014, the first year they were in operation, and this year it offered plans in fewer than half the states.

None of this is to say that there aren't improvements the government could make to help insurers navigate the exchanges. Congress anticipated that, in the early years, insurers would struggle to anticipate their medical costs, and that as a result they would set premiums too low and thus lose money — exactly the problem that UnitedHealth is now reporting. That's why the law established a series of buffers against losses, which Congress could extend or expand.

The government could also require that most people buy coverage only during the regular open-enrollment period. UnitedHealth said those who get insurance outside of that period tend to use more services, increasing its costs.

Finally, the government can and should do much more to encourage the young and healthy to get insurance. It's not as if they don't need it — accidents and illness don't discriminate on the basis of age. More young and healthy customers would make the risk pool more attractive to insurers.

The exchanges face some real challenges. UnitedHealth's announcement doesn't make failure any more likely. It just reinforces something that should already have been obvious: Obamacare still needs some work.

—Editors: Christopher Flavelle, Michael Newman.

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