President Obama’s landmark Affordable Care Act was seemingly dealt a huge blow Tuesday when the nation’s largest insurer by people covered, United Healthcare, announced it was leaving the state exchanges in all but a “handful” of states.
These exchanges are the cornerstone of Obamacare, which provide a marketplace for Americans who don’t have a work insurance offering to pick a plan to cover themselves and their families.
While it would appear that United Health’s exit would radically change the game for the ACA exchanges, the impact may not be that significant.
For one thing, United Health never really entered these marketplaces head first. In fact, as of March 31, the company insures only 750,000 of the more than 12 million people enrolled in Obamacare.
In fact, according to the non-partisan Kaiser Family Foundation, which focuses on healthcare policy, the impact on enrollees premiums and competition would not be substantial.
“The effect of a United withdrawal nationally would be modest,” said a study by Cynthia Cox and Ashley Semanskee of Kaiser. “The national weighted average benchmark silver plan would have been roughly 1% higher in 2016 had United not participated (less than $4 per month for an unsubsidized 40-year-old).”
Cox and Semanskee found that United offered mostly high cost plans in just 34 states in the US as of 2016, so by removing themselves from the exchanges the impact would not be as significant as you may think in terms of increased cost or limited choice.
In terms of competition, if United does remove itself from all exchanges Cox and Semanskee found that 53% of all counties covered by exchanges would have only one or two exchanges. While this is significant, most counties with limited options are more rural and less populated. Therefore, the total number of people with limited choice is still relatively low.
Here’s Cox and Semanskee (emphasis added):
If United exits everywhere (again, with the exception of Harken Health in Georgia), the number of Marketplace enrollees with access to only one or two exchange insurers would increase (from 1.9 million to 3.8 million or from 15% to 30% of all enrollees), and the number of enrollees with only one insurer would also increase (from 303 thousand to 1.4 million or from 2% to 11% of all enrollees). Still, the vast majority of Marketplace enrollees (8.9 million or 70% of enrollees nationally) would continue to have a choice of three or more insurers, even in the absence of United.
This isn’t to say that there won’t be an impact on some people trying to gain health insurance through exchanges. As the researchers note, the move will disproportionately impact those in rural areas in some Southern states. But, in aggregate, the removal of United from Obamacare isn’t a massive shift for costs or competition.
“On average nationally, based on our analysis of 2016 insurer premiums, United’s participation on the exchanges had a relatively small effect on premiums,” concluded the study.
“As a result, the weighted average benchmark premium would have been roughly 1% higher had United not participated in 2016 (not accounting for the possible effect changes in insurer participation may have had on pricing behaviour or the potential for new entrants to the market).”
Now, as Cox and Semanskee note, the long-run effects of this move are a bit more uncertain. Insurers in communities with less competition could begin raising prices, but there are some provisions in the ACA that would prevent that.
Also, the impact of the move politically is another issue entirely. Republicans have been calling for the end of Obamacare since it was passed, so the optics of United Health’s move are up for debate.
In the short-run, it doesn’t appear that United Health’s decision to pull out of the exchanges will make a huge difference for most Americans.