Biggest insurer drops caution, embraces Obamacare
UnitedHealthcare, the insurance giant that largely sat out the health law's online marketplaces' first year, said Thursday it may sell policies through the exchanges in nearly half the states next year.
"We plan to grow next year as we expand our offering to as many as two dozen state exchanges," Stephen Hemsley, CEO of UnitedHealth Group, the insurance company's parent, told investment analysts on a conference call. He was referring to coverage sold to individuals.
The move represents a major acceleration for the company and a bet that government-subsidized insurance, sold online without regard for pre-existing illness, is here to stay. UnitedHealthcare sells individual policies through government exchanges in only four states now.
Even analysts who follow the company closely seemed surprised.
"You're making a really big move," Kevin Fischbeck, an analyst for Bank of America, told the company's executives. "You're going to do a couple dozen states. You've really moved in. What's giving you the confidence … that it's going to be stable next year?"
The answer, the bosses said, is that the marketplaces look sustainable, even without some of the reinsurance and risk-spreading backstops put in place for carriers in the first few years. They know the prices now, they said. They know the regulations. They know how consumers are behaving.
"We felt that the markets that we're looking at now are much more established," said Gail Boudreaux, who runs UnitedHealth Group's insurance division."We've always felt that it was part of our strategy and plan – that this is a good, long-term market."
Broad participation by UnitedHealthcare will increase competition and should help keep premiums down, according to theory and research. A recent paper by economists Leemore Dafny, Jonathan Gruber and Christopher Ody found that if UnitedHealthcare had sold policies through the exchanges this year in every state where it already does business, premiums would have been 5 percent lower.
The company expects substantial shopping and price comparison when open enrollment begins Nov. 15 — despite the administration's proposed regulations on automatic re-enrollment that may give incumbents an edge.
"We believe there'll be some shopping, even though people don't have to shop," said Jeff Alter, head of UnitedHealthcare's employer and individual insurance division. "The natural consumer play of an exchange is going to cause a shopping experience."
Kaiser Health News is an editorially independent news service. It is a program of the Kaiser Family Foundation, a nonpartisan health-care-policy research organization unaffiliated with Kaiser Permanente.