By Stephanie Kirchgaessner
Financial Times, September 3, 2013
Some big US health insurers, including Cigna, Aetna and UnitedHealthcare, are steering clear of most of the new state healthcare exchanges amid uncertainty about the kinds of customers they might attract: namely sick ones.
The three companies have said they are taking a cautious approach because they need to evaluate how the markets – set up under the “Obamacare” reforms – will work. They add that they are specialised in providing insurance to big employers, not the individuals and small businesses that will be served by the exchanges.
An Obama administration official said risk adjustment and reinsurance programmes under the law were designed to offer incentives to health insurers to make sure they do not avoid enrolling customers with the greatest needs.
A spokesman for Cigna, which is participating in five of 50 new exchanges, agreed that the provisions would help the company manage risk.
UnitedHealthcare said it would participate in about 12 exchanges initially, but said the exchanges had the “potential to be a growth market” over time.
A spokesman for Aetna said it would participate in up to 14 exchanges. It emphasised that it planned to position itself “for the future”.
By Don McCanne, M.D.
UnitedHealthcare, Aetna, and Cigna – three of the largest private insurers in the nation – have decided to not participate in most of the state exchanges being established under Obamacare. Obama and his health care architects had told us that it was better to build on the system we had, expanding the prevalence of private insurance. With this gift of a ready-made market for the private insurers, why are they sneaking away?
America’s private insurers have always welcomed the healthy and shunned the sick. The greatest example is the largest insurance market of all – America’s workers and their families – not only the largest market in the nation but also the healthiest.
In contrast, the individual and small group markets exposed insurers to greater risks, so they countered by using underwriting to select only the healthy while rejecting those who needed health care. In turn, Obamacare now prohibits selective enrollment – cherry picking and lemon dropping. Insurers rightfully fear that those with greater health care needs will rush into the exchanges, creating high cost risk pools that would price premiums out of the market.
About 31 million people will remain uninsured. They are healthier than average since they will include young invincibles who would rather take a chance, hard working immigrants and their families, many of whom are prohibited from participating, lower-income workers who are exempt because of lack of affordable plans for them, and families with incomes high enough to disqualify them from subsidies yet low enough that they will find the premiums to be unaffordable, especially for plans that still leave them exposed to the out-of-pocket expenses of high deductibles and other cost sharing.
These big insurers aren’t dumb. If they are going to sell plans in the exchanges, they want most of these low-cost individuals included in order to dilute the high costs of the sick who will enroll, thereby allowing the insurers to offer competitive premiums. Quite clearly, they are not convinced that will happen.
Will delaying a year result in an influx of some of these healthy individuals into the plans? Look at the list again. Likely some of the previously healthy who develop medical problems will want in. But that will increase the costs of the pools even more, causing the healthier to disenroll because the premiums are driven up further – the classic problem of the death spiral of skyrocketing health insurance premiums.
We should listen to UnitedHealthcare, Aetna, and Cigna. This is a highly flawed method of financing health care. It just doesn’t make sense from a business perspective. But also we should give some thought to this ourselves. Does it really make sense to to insert an administratively wasteful insurance intermediary that has found great success in manipulating the markets so that they can welcome the healthy and shun the sick? Medicare Advantage has already proven to us that private insurers will always find a way around risk adjustment and other regulations in order to shift costs away from them and onto taxpayers.
Obama and friends crafted this program to take good care of the insurers while depriving us of a less costly, more efficient and more effective social insurance program – an improved Medicare for all – and yet the insurers are still not satisfied. It’s too bad that we are going to have to wait until 2015 and 2016 to see premiums skyrocket and insurers bail out.
What will be our response then? Will we let the insurers continue to cover the healthy while accepting for the rest of us the fact that financial hardship is simply an inevitable consequence of facing serious illness? Based on the lack of public engagement to this date, it seems like that is where we are headed.