Will insurers’ doubts be Obamacare’s unraveling?

Editor’s Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Carol Gibbons, RN, BSN, NHA, who is CEO of CJ Consulting, which specializes in healthcare revenue cycle management. The views expressed in these blogs are those of their respective contributors and do not represent the views of Medical Economics or UBM Medica.

UnitedHealthcare has generated more conversation about the challenges with the Exchange Products and that has certainly helped their stock price. 

Dana Blankenhorn explains in an article from Seeking Alpha, “the shares are up 7.7% overall, outpacing a group what was mostly flat to down. This is natural, in part, because while its competitors are in the throes of getting through mergers and integration. UNH remains bigger than any of them - even after the combinations. Its competitors are merging to become more like what it already is.” 

Further reading: Doctors are paying the price for insurers' Obamacare exit

His recommendation was that this should be the only healthcare stock to purchase or hold at the moment.

Looking back to the third quarter last year when UnitedHealthcare was touting the increase in their revenue and told investors they would be expanding the ACA market along with their Medicare and Medicaid portfolio, their portfolio of government products seemed to be profitable. 

I read the entire text of the call with investors at the end of the third quarter and it was certainly positive saying they are committed to the exchange market. CFO David Wichmman told investors “rather than wait for our own experience with our new members to fully develop, we increased rates and repositioned certain products market by market for 2016, and we expect improved performance next year. We will expand to 11 new markets in 2016 and we continue to expect exchanges to develop and mature over time into a strong viable growth market for us.”

Wait for it… a month later, they turned the market sideways with their statement that they might withdraw from the ACA exchanges because they have lost millions of dollars.  Is it just me, or was this top insurance company not keeping up with their losses on a quarterly basis?  Do they really think we believe they just discovered they are losing so much money with the ACA program, it might cause a need to exit the ACA market in 2017? 

I sensed an ulterior motive of some kind for all the rattling of sabers at that point. It certainly gave the Obama admiration a black eye for one of the largest carriers to say they cannot continue to lose so much money with this product and they are going to pull back their advertising to limit the enrollment.  What could cause such a sudden change in rhetoric?

Next: Most likely, UnitedHealth had something else up its sleeve

The other carriers quickly reassured investors they intend to stay in the ACA market for the long run to shore up their stock prices. 

As I read the newsletter Fierce Healthcare Payer, it began to highlight an issue that all the carriers are experiencing.  United Health Group CEO Stephen J. Hemsley was quoted as saying, “the main driver of the pressure was new members who gained individual coverage during special enrollment periods that turned out to be a ‘strong user of services.’ Aetna and other carriers have complained about the same problem and recently told analyst firm UBS ‘that the phenomenon of more individuals coming in and out of exchanges during special enrollment periods does not bode well for having a balanced long-term risk pool.’”

Previous blog: Administrative costs are killing U.S. healthcare

Clearly, UnitedHealthcare’s statements were intended to get attention, and they were successful. It  remains to be seen if the complaints about how patients are allowed to enter and exit the market will result in any changes in the program. We certainly saw multiple co-ops close last year, which leaves customers having to choose providers in a new network. 

The government has not held up its end of the bargain to reimburse losses for the first three years to help these payers.  This year they were told that there is only enough money to cover 12.5% of their losses.

More likely, UnitedHealth had something else up its sleeve. In January, Blankenhorn pointed out  the most likely plan, which was not to leave the exchanges, exactly.  In Seeking Alpha he says UNH is adapting to the new environment of the ACA by delivering service, not just insurance, through a new unit called Harken Health.

“It's called a start-up but it is, in fact, a subsidiary,” Blankenhorn says. “It was put together by a UnitedHealth executive named Ton Vanderheyden, whose job is now CEO of Harken.”

UnitedHealth is attempting to model a product similar to Kaiser Permanente by having a very limited market and providing clinics in retail centers which are convenient to patients. All physicians are employees and having really good technology, adherence to best practice standards is not optional.

They have already demonstrated they can make money with this model through their OptumHealth Unit.  This unit has purchased Medicare and Medicaid practices and shown they can operate at a profit. 

Next: Will any of this make a difference i the ACA exchange plan regulations?

If this new model can be successful with the exchange products, then UnitedHealth can throw their political weight around by threatening to leave the exchanges. There are still problems with the structure that allows patients to not pay premiums on a policy purchased on one of the insurance exchanges for a variety of reasons. It allows some subscribers, who become ill, to re-enter the exchange without paying premiums the whole year. 

UnitedHealth pulled back marketing its ACA products at the end of last year’s open enrollment, and have already announced that they will leave most of the exchanges in 2017.

Related: Who is ruining the healthcare system?

However, according to Blankenhorn, it is building Harken clinics in the states where they are leaving the ACA exchanges so they will still have a presence.

Will any of this make a difference in the ACA Exchange plan regulations?

Humana is now evaluating further pull back from the ACA market as it continues to prepare a merge with Aetna. They made substantial changes in the exchange market for 2016 by eliminating most of their PPO products and leaving only HMO products that have a narrower market. Blue Cross also eliminated all of its PPO products from the exchange market and left its HMO product that pays lower fees and has a more limited provider network. So many patients are again being required to change physicians.

Is the ACA unraveling?  We will have to wait and see if these challenges can be addressed.  There is a risk that premiums for plans in the exchanges have to increase so much that the government cannot afford to sustain subsidies for purchasing exchange plans.

Thus far in 2016 only 11 of the 23 CO-OPs have survived financially. Elections later this year will bring more attention to this and other issues surrounding the survival of the ACA and the  exchange regulations.