By the Wall Street Journal
President Obama claimed credit at a Los Angeles fundraiser last week for “the steady progress that happens when people who love this country decide to change it,” and reality is unlikely to darken his farewell tour. But for everyone else, note that the largest U.S. health insurer is quitting ObamaCare.
On Tuesday UnitedHealth Group reported a terrific first quarter, with strong performance across nearly all business lines. There was one exception: The conglomerate’s insurance exchange unit raised its projected Affordable Care Act losses for 2016 to $650 million from $525 million, after booking $475 million in red ink last year.
CEO Stephen Hemsley said ObamaCare’s instability, small market size and costly patient population “continue to suggest we cannot broadly serve it on an effective and sustained basis.” He said UnitedHealth will withdraw to “only a handful of states” in 2017.
Liberals claim this doesn’t matter because UnitedHealth was insufficiently committed to ObamaCare, as if it preferred to leave money on the table. The insurer didn’t plunge head-first into the exchanges in year one of the law like the larger industry, but the latecomer expanded to 34 states in 2016 from 23 in 2015 and four in 2014. Mr. Hemsley has been more vocal than most insurance CEOs about the long-term importance of retail, customer-facing coverage outside of the employer business. He told an investors conference last year that he decided to ramp up because he couldn’t believe the ObamaCare market “would form this slowly, be this porous, or become this severe.”
In other words, ObamaCare’s central planners can’t put their theories into practice. Normally sedate insurance markets have been roiled by everything from the federally chartered co-op failures to enrollment well below projections. ObamaCare’s architecture also makes it economically rational for consumers to wait until they are about to incur major medical expenses to get covered, and administratively created “special enrollment periods” encourage such gaming.
Oliver Wyman calculates that people who signed up during one of these windows—about one of five ObamaCare beneficiaries—are 10% more expensive than people who join during normal periods and 40% more likely to drop their plan later. Meanwhile, the nonprofit Blue Cross Blue Shield Association warned last month that new ObamaCare enrollees had medical costs 22% higher on average in 2015 than people with employment-based coverage.
If UnitedHealth departs all markets, the number of U.S. counties served by three or more ObamaCare insurers will fall to 48% from 64% today, while the counties with a single insurer will rise to 24% from 7%.
These trends could lead to even larger premium spikes than the new ObamaCare normal. This would undermine the sustainability and viability of the exchanges, as would the other alternative, which is for other insurers to start dumping unprofitable ObamaCare plans from their portfolios. UnitedHealth spent months calling for changes to the law, which liberals dismissed as empty threats to extract regulatory concessions. Whoops.
Observe, too, that Democrats are already preparing for a post-ObamaCare world, asHillary Clinton and Bernie Sanders debate how quickly to move, and how transparently, toward a single-payer system. The pity is that the policy-free Republican debate hasn’t developed much beyond promises to “get rid of the lines,” as Donald Trump put it. With the UnitedHealth exit, add true health-care reform to this year of so many wasted GOP opportunities.