Are UnitedHealth's Problems Self-Inflicted? California's Exchange Chief Says Yes

The head of the largest state-run exchange wants UnitedHealth to stop blaming its losses on the Affordable Care Act and instead look at its own actions, according to California Healthline, which reported the interview with Peter Lee, executive director of Covered California.

Since November, UnitedHealth has made a series of statements to explain its losses on both state and federal exchanges in 2015. UnitedHealth sat out the launch of Obamacare in 2014, but will join the California market for 2016. Mistakes in pricing and networks led to losses of $475 million on the exchanges for 2015, and the projection for this year is $500 million.

While UnitedHealth blames the construction of the ACA exchanges and elements of the law, Lee told the news outlet that the insurer has only itself to blame. "Instead of saying, 'We screwed up,' they said, 'Obamacare is the problem and we may not play anymore,'" he said, referencing UnitedHealth’s statements that it may bolt the exchanges for 2017.

“It was giving an excuse to Wall Street and throwing the Affordable Care Act under the bus,” Lee said.

A report from Urban Institute last week found that a little of each is true. Researchers there agree with insurers like UnitedHealth and Aetna that special enrollment provisions are being abused and need to be tightened up so that consumers don’t wait until they are sick to seek coverage. Under the law, consumers can use special enrollment to make changes for life events such as moving, getting married or having a child.

A core element of the ACA is the individual mandate, which requires each person to have coverage or pay a penalty, which this year rose to a $695 or 2.5% of income. Insurers need enough healthy adults to sign up for coverage to offset payments for those who are sick and use insurance frequently.

The Urban Institute did find, however, that UnitedHealth tended to charge more than its competitors and had larger provider networks, which attracted sicker enrollees who needed hard-to-find specialists. UnitedHealth often found its way to smaller markets with limited competition, so if it leaves the exchanges in 2017, its former competitors could feel free to raise premiums, the report found.

Some feel UnitedHealth erred with its slow entry into many markets, including a decision to wait 2 full years to join the California market. Now, the insurer faces a steep learning curve against competitors who have 2 years’ worth of experience and claims data to use in pricing their products.

The Urban Institute said UnitedHealth’s statements are at odds with recent events.

“Our basic conclusion is that marketplaces are increasingly driven by competition among Blue Cross—affiliated insurers, Medicaid insurers, provider-sponsored insurers, and in fewer regions, local or regional insurers,” the authors wrote.

“In addition, given that United is expanding into more marketplaces in 2016 and their participation is growing significantly this year after even larger relative growth in 2015, their discussion to pull out of the marketplaces is surprising.”