There is some
consternation today over United Health Care's considering exiting the
field of the Health Insurance Exchanges – the Affordable Care Act's
policies for individuals. Does this mean that the ACA is not
working?
Well, it's a
complicated situation. I am indeed afraid that the ACA is not working in a
very significant way: the ACA has incorporated High Deductible Health
Plans into its midst, and they suck, as both the NYT and the Boston
Globe (below – quoting me!) have pointed out graphically this week:
The worse the
plans are for people the more enrollment will fall, and I have to
think that the high deductibles make people feel they are not getting
much for their money, so some don't enroll or reenroll.
But I think the
UHC issue is different, and doesn't indicate ACA failure as such.
UHC is very big and the exchange programs are a relatively small part
to their business. They can probably make a profit on them, even
though they say they can't, but the profit might not be big enough
for them to want to concentrate on it. GE's strategy under Jack
Welch was to make sure that every GE unit was #1 or #2 in the
industry, and if they weren't, they either had to be built up or
sold. From a corporation's point of view, you need to have some
focus. And as we appreciate that point of view, I guess it's not
such a bad thing to see them exit from this business segment. It's
just a decision that there are more profits to be had elsewhere, and
a corporation can't do everything. Is it such a bad thing for us
that UHC can't find that much profit in Exchange programs? I think
it's fine.
Looking back,
the idea of the ACA was to make insurance companies make money a
different way from the way they did it before, which was largely by
excluding subscribers by underwriting, and writing tricky policies.
Instead, insurers would have to make money by efficiency and service.
That was a big gamble for both sides -- can insurance companies
reform themselves? Can corporate cultures change? If not, then
better to exit the field, concentrate on traditional markets, and
other health-related fields like Optum.
Here is the way
I put it six (!!!) years ago:
There will have
to be a period of time where old companies try to adapt, and where
new companies could even come into being to meet the new standard.
The new companies might emerge from health care delivery models
themselves, I would think. We'll just have to see.
Here's that NYT
article today:
http://www.nytimes.com/2015/11/20/business/unitedhealth-lowers-profit-estimates-citing-losses-in-policy-sales.html?hpw&rref=business&action=click&pgtype=Homepage&module=well-region®ion=bottom-well&WT.nav=bottom-well&_r=0
Budd Shenkin
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