United Healthcare, Alabama’s second largest health insurance provider, and the nation’s largest, says it may exit health exchanges in several states, including Alabama as the cost of participating has exceeded the potential profit making opportunities of more enrollees.
United’s CEO, Stephen J. Hemsley made the announcement during the company’s first-quarter earnings conference call Tuesday, saying “smaller overall market size and shorter-term, higher-risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis.”
The company expects to lose $650 million on exchange business nationwide in 2016.
As of mid-2015, there were 141,361 people with private coverage through the federally-run Alabama exchange, but if United does pull out of the marketplace, that number could drop as customers either lose their coverage or are pushed to look for another insurer.
According to health policy researchers with the Kaiser Family Foundation, United’s exit and the resulting decreases in competition could mean higher insurance prices for other Alabamians in the exchange.
Congressman Bradley Byrne (R-AL01) says United leaving the Alabama exchange is evidence of weaknesses Obamacare.
“When you have a major insurer like this one that just pulls out altogether, that’s a huge warning sign; that’s not going to crash the program, but it’s indicative of a problem that’s not being addressed in the program,” said Byrne. “Now, what happens when you have fewer people offering insurance? It’s like any other thing the fewer people that off the product or the service, the more the price goes up.”
But while opponents of the Affordable Care Act, which established the exchanges, are holding the exit as proof the law doesn’t work, the Obama administration is downplaying the gravity of the situation.
“As with any new market, we expect changes and adjustments in the early years with issuers both entering and exiting states,” said Department of Health and Human Services spokesman Ben Wakana in a statement Monday. “The marketplace is a reliable source of coverage for millions of Americans with a robust number of plan choices. We have full confidence, based on data, that the marketplaces will continue to thrive for years ahead. The number of issuers per state has grown year-over-year.”