Friday, November 20, 2015

United Health Care Might Exit The Exchanges

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.

Budd Shenkin

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