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UnitedHealthcare's Exit Leaves Monopolies in Many Places

Less competition typically means higher prices for consumers. But that isn’t necessarily true in the case of health insurance exchanges.

The UnitedHealthcare headquarters in Minnetonka, Minn.
In late April, UnitedHealthcare announced this would be its last year offering health coverage on “all but a handful” of state insurance exchanges. Going forward, the nation’s largest health insurer will only have a presence in New York, Nevada and Virginia's marketplaces.

That will leave Kansas and Oklahoma with just one insurer each, six states with monopolies in more than 50 percent of its counties and four states with only two insurers in most counties. (View the chart at the bottom for more detailed information.)

“It’s always a worry when there’s only one carrier in an area,” said Mike Rhodes, deputy commissioner of the Oklahoma Insurance Department. “They’ve all left for the same reason: The marketplaces just haven’t worked the way they wanted and needed them to."

While enrollment numbers have generally hit federal expectations, insurers have struggled to profit because many of the people using the exchanges are the sickest and costliest patients. According to a recent Blue Cross and Blue Shield report, new marketplace enrollees had 22 percent higher medical costs than employer enrollees.

Oklahoma is in talks with other insurance carriers who could still enter its marketplace for 2017. But even if Kansas and Oklahoma are left with only Blue Cross and Blue Shield, it’s unlikely that consumers will feel too much of a pinch.

That's because 86 percent of the people who use the marketplaces get health insurance subsidies. If premiums increase, so do their subsidies.

In North Carolina, for example, premiums increased for 2016, and 33 of its counties already have only one provider. But according to Sorien Schmidt, state director for Enroll America, a health-care enrollment coalition, that hasn't stopped people from signing up for coverage on the exchanges.

Basic economics indicates that less competition means higher prices for consumers. But that isn’t necessarily true in this case because "these companies are going to have the government looking over their shoulder as they set prices,” said Sabrina Corlette, professor at Georgetown University’s Health Policy Institute. “There might be a monopoly in some states and counties, but we have some intervening forces.”

Anytime an insurer proposes a premium hike of more than 10 percent, a state insurance official is required "to review" the request. But while 37 states have the power to reject rate increases, 13 states do not.

States can also take action, says Corlette, to "make transitions as smooth and stress-free as possible” for the hundreds of thousands of people who now have to shop around for new coverage. For example, 16 states have protections in place for residents to continue to receive health care -- generally for up to 90 days -- if they’ve been forced to switch carriers.

UnitedHealthcare's exit was hardly a surprise. The company only tepidly embraced the health exchanges, entering just a handful of states in the second year of implementation before expanding in 2015 and 2016 to 34 states. In November, the insurer's parent company -- UnitedHealth Group -- said they were unhappy with losses accrued in the marketplace and were thinking of withdrawing.

For Sheldon Weisgrau, director of the Health Reform Resource Project, these sorts of shakeups are to be expected when you merge private and public interest.

"I think very few people understand how astronomically expensive the health-care industry is," he said. "The exit could be interpreted as a sign the marketplace isn't operating as robustly as it should be. But the truth is, we're all still figuring it out."

How UnitedHealthcare's Withdrawal Will Impact Each State

State Enrollees Where UHC Participates Enrollees in Counties That Will Drop From 2 to 1 Insurer Enrollees in Counties That Will Drop From 3 to 2 Insurers
Alabama 195,047 130,359 64,688
Arizona 203,064 30,761 14,825
Arkansas 73,643 0 0
California 203,472 0 158,769
Colorado 125,276 0 7,318
Connecticut 116,019 0 0
Florida 1,742,806 268,068 367,156
Georgia 569,200 20,184 47,604
Illinois 304,434 0 0
Indiana 196,241 0 6,567
Iowa 48,311 0 47,161
Kansas 101,553 101,553 0
Kentucky 93,666 18,540 20,488
Louisiana 214,143 0 130,990
Maryland 162,103 0 0
Massachusetts 213,883 0 0
Michigan 153,559 0 1,905
Mississippi 108,668 47,001 61,667
Missouri 290,197 3,723 97,380
Nebraska 87,824 0 840
Nevada 79,278 0 79,278
New Jersey 288,571 0 0
New York 204,536 0 0
North Carolina 563,819 155,008 408,811
Ohio 243,714 0 0
Oklahoma 145,328 145,328 0
Pennsylvania 289,131 0 172,724
Rhode Island 34,670 0 34,670
South Carolina 45,649 20,674 24,975
Tennessee 268,860 78,803 69,333
Texas 1,044,424 26,323 9,780
Virginia 245,465 0 8,579
Washington 200,691 81,912 0
Wisconsin 193,895 37 5,856

NOTE: Enrollee totals refer to individuals signed up for marketplace plans in counties following the end of open enrollment in 2016, not how many are enrolled in UHC plans.
SOURCE: Kaiser Family Foundation, 2016 analysis of UnitedHealth Group's Premiums and Participation in ACA Marketplaces.

Mattie covers all things health for Governing.

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