The Affordable Care Act’s friends and foes alike were in full hyperventilation mode Thursday after the nation’s biggest health insurance company, UnitedHealth, signaled that it was considering withdrawing from Obamacare’s individual insurance business by 2017.

Bloomberg’s Megan McArdle, who long has had an itchy trigger finger when it comes to the ACA, speculated about whether fears of the “adverse selection death spiral,” in which rising prices drive healthier people out of the insurance market, forcing prices even higher, are back. (She also acknowledged that “there might be a relatively easy fix” if that were so.)

Market data has signaled higher risks...while our own claims experience has deteriorated. UnitedHealth CEO Stephen Hemsley expresses his frustration with Obamacare

At the Huffington Post, Jonathan Cohn, one of our most percipient analysts of healthcare reform and a supporter of the ACA, declared United’s announcement to be “a sign of some real problems on the horizon” for the insurance exchanges that are central to the individual healthcare marketplace.


Yet United’s concerns about its Obamacare business may say a lot more about the company than the law.

As has been widely noted, United is the nation’s biggest health insurer. But that’s misleading: in the individual market served by the Obamacare exchanges, it’s small beer. UnitedHealth’s core business is selling employer-sponsored health plans, and it hasn’t been known for its familiarity with or success in the individual market, which is dominated nationwide by Blue Cross and Blue Shield plans, especially those owned by Anthem Inc. (Pre-ACA, Blues were the biggest individual insurers in 34 states.) After enactment of Obamacare, United moved only gingerly into the exchange market, participating in only five states in 2014 and 15 this year.

The company didn’t say it was definitely pulling out of Obamacare. It’s still selling policies for 2016, and is only considering bailing in 2017. Hemsley’s remarks were a combination of sober news about the company’s ACA experience so far and lowballing for investors aimed at steeling them for bad news in the hope or expectation of an upside surprise. It’s impossible to know just yet which factor is dominant.

United’s exchange enrollment this year came to only about 540,000, out of total exchange enrollments of more than 9 million. In other words, it was a big nationwide insurer with less than 6% of this particular market segment, spread among more than a dozen states. In 2013, when the ACA first rolled out, United was the largest carrier of individual policies in only one state, Nevada, where it had fewer than half the enrollees.


The company has no presence at all in the exchange market in California, by far the nation’s largest with more than 1.5 million enrollees. UnitedHealth will be offering plans in the state for the first time in 2016, after sitting out the first two years of the Obamacare individual market. Covered California, the state’s individual plan exchange, limited UnitedHealth to selling 2016 in a few smaller markets, as my colleague Chad Terhune reported, because the company left the state’s individual market in 2013 and “spurned the launch of the exchange.”

It’s notable that United’s announcement Thursday of its discontent with its ACA experience--"market data has signaled higher risks...while our own claims experience has deteriorated,” its CEO Stephen Hemsley said in a conference call--comes only weeks after the company’s chief financial officer, David Wichmann, projected that the exchanges would develop “into a strong viable growth market for us.”

One might wish for United’s top brass to get their stories straight, but the fact is that the company seems to have worked virtually since the Nov. 1 start of open enrollment for 2016 to discourage enrollment.

The firm reportedly cut agent commissions by as much as 80% for exchange enrollments and dumbed down its online portal for brokers (H/T Charles Gaba). Thursday’s announcement, coming as buyers were beginning to ponder their choices for insurance in 2016, could be seen as part of the same effort--who would sign up today for 2016, with a company that might not still be your insurer in 2017?


Put it all together, and United is grousing about a business line that it was never comfortable with anyway. So it’s instructive to compare Hemsley’s remarks to those from insurers that are more committed to the individual market for the long haul. They’re not overjoyed with their results up to now, but they’re expecting things to improve by 2017 (around the time United is contemplating an exit).

In a conference call Oct. 28, Anthem CFO Wayne DeVeydt said the company has seen “profitable growth” in the individual market over the last two years and this year. He and CEO Joe Swedish expressed frustration at a flattening out of enrollment growth, which is something that Health and Human Services Secretary Sylvia Burwell has also noted.

The Anthem executives said they’re still trying to work out the proper pricing in the individual market, and that they’ve been losing business to rivals that are undercutting them with prices that are unwisely low, in their view. But they expressed the conviction that the trends will sort themselves out over the next couple of years.

Similar signals came from Aetna, which said it still sees the individual exchanges as one of several “major growth opportunities.”


“It’s way too early to call it quits on the ACA and on the exchanges,” CEO Mark Bertolini said on Oct. 29. “We view it still as a big opportunity.”

So while UnitedHealth’s threat to bail out is unquestionably a yellow flag for the ACA, declaring it a death knell is vastly premature. Certainly changes in the law and the structure of the individual market are needed, and happening; they might happen faster and more effectively if large blocs in Congress and the state weren’t still determined to see Obamacare fail.

Before the ACA, the individual insurance market was a playground for profiteering insurers who did their best to exclude risky customers; now they have to serve all comers, and the right price and conditions for managing that mandate are still being worked out. UnitedHealth may not be patient enough to see the challenge through, but others are...so far.

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