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UnitedHealth's Likely HIX Exit Not a Death Knell

December 09, 2015

Because it has aggressively developed other business lines, UnitedHealth is far less interested than other large health insurers in working with exchange populations, says one industry observer. So far, no other large payers have indicated that they intend to follow United's lead.

In what would be a sharp change of direction for the nation's largest health insurer and an alarming harbinger for the marketplace, UnitedHealth Group has sent up signals that it may exit the public health insurance exchanges for 2017.

Citing big losses, the insurance giant in November reported that it had lost $425 million from health plans sold on the exchanges and had scaled back its marketing efforts for these products in 2016 while it reevaluates their viability. 

The company also revised its 2015 net earnings to $6.00 per share, down from $6.25 to $6.35.

"In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated, so we are taking this proactive step," said Stephen J. Hemsley, chief executive officer of UnitedHealth Group on a conference call last month.

"We continue to be pleased with the growth and overall performance of our company outside of the individual exchange products and look forward to strong, positive, and broad-based earnings growth across our enterprise in 2016."

Others Not Following Suit
While some media reports immediately called UnitedHealth's possible HIX exit "a blow to the Affordable Care Act" and a "bombshell" for Obamacare, these assessments seem far from the truth.

Other large health plans have not indicated any intentions to follow suit at this point. On an October 29 earnings call, Aetna chairman and chief executive officer Mark Bertolini said that while the exchanges are a "challenging" segment, his organization remains committed to its HIX products.

"We continue to work constructively with CMS and the states to serve our 1.1 million individual members. We have always said that Aetna would participate in this emerging opportunity in a prudent manner, in geographies where we have the cost structure to offer attractive products to consumers, and earn an appropriate return for our shareholders," Bertolini said.

"I think in the ACA-compliant plans and in the public exchanges, we view this as a long-term market potential… We view it still as a big opportunity for the company. I'll remind everybody it's just a little over 6% of our operating revenue, so we still view it as an opportunity to play."

Likewise, Anthem president and chief executive officer Joseph Swedish said on November 20, the day after UnitedHealth Group announced its earnings forecast, that his organization would continue its participation in the exchanges.

"As a leader during this time of unprecedented transformation in healthcare, Anthem remains committed to enhancing access to high quality, affordable healthcare for all of our members inside and outside of the insurance exchanges and continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market," Swedish said.

Announcement Not a 'Bellwether'
Harry Nelson, founder and managing partner at Los Angeles-based law firm Nelson Hardiman, LLP, says that while UnitedHealth's announcement is getting a lot of press, it does not necessarily bode badly for the marketplaces in general.

"United, among all of the national payers, has pursued a different strategy from the start and was the least invested of the big plans in the exchange population and the least willing to take risk," Nelson says.

"I don't see it as a bellwether. Other plans seem to be much more invested, even if this market turns out to be a loss leader, within limits. It would be a much bigger deal to see one of the big invested plans exit, but I think it's way too early for that." 

Over the past decade or so, Nelson says, UnitedHealth has aggressively developed other business lines—such as Optum, its healthcare data, analytics, pharmacy care services, and consulting company—making it far less interested than other insurers in working with exchange populations.

"On the highest level, all the plans have a distinct strategy of how they are going to try to manage their business risk and growth… United has a broader range of products and services and is not as purely focused on health insurance markets like the other big carriers," Nelson says.
"My take on it is that as a result, United is more conservative about taking on risk than some of the other plans. It's not a core part of their strategy to participate in the exchanges."

Other Payers More Prepared for HIX Risk
Some of the other national carriers are more prepared than UnitedHealth to take on the risk associated with the exchange population, which tends to have a higher prevalence of preexisting chronic conditions and a spottier history of accessing preventive care than the average healthcare consumer, Nelson says.

"Because United has been so successful in other non-insurance markets, like health data, they have significantly more avenues for revenue than other plans and are much less invested in finding strategies to control costs associated with treating patients with chronic illnesses, for example," he says.

"They have absolutely been less committed than other carriers and, therefore, are much quicker to exit the exchanges based on risk. I think they are perfectly OK with not capturing the enormous exchange population where other carriers see it as a key market."

For instance, Nelson says, while UnitedHealth has tried to cherry pick its plan members as a way of reducing financial risk, Blue Cross Blue Shield has been engaged in designing health plans and supporting clinical protocols geared toward higher-risk patients.

"United's strategy has been to pick and choose and find lower risk populations. Blue Cross is much more invested and focused on population health issues than United. Blue Cross Blue Shield isn't going anywhere when it comes to exchanges, at least not yet."

Abandoning HIX is 'Tactical, not Strategic'
Unlike UnitedHealth, large insurers such as Aetna, Anthem, and Blue Cross Blue Shield are taking the long-term approach of finding ways to improve care delivery, outcomes, and cost, and they view the HIX population as an important piece of the puzzle, Nelson says.

"They recognize that whatever needs to happen on a systemic level is going to be advanced by covering the whole spectrum of the American population. Figuring out how to provide affordable services is something of a moving target for everybody, but companies other than United are much more focused on how to do it," he says.

And while rolling out successful population health programs represents "a lot of hard work," Nelson says many of the national carriers are deeply invested in doing so.      

"There is an enormous amount of work to be done, and I feel that other plans are more focused on getting there than United ever was… United is taking the opposite strategy of improving the bottom line by not dealing with the exchange population. Others may view that as a short-term approach. It's tactical, not strategic."

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