UnitedHealth Group’s experimental health plan subsidiary is pulling out of the Affordable Care Act exchange markets in Chicago and Atlanta after losing nearly $70 million in the first six months of 2016. And its founding CEO, who spearheaded the plan’s primary care-focused benefit design, has been replaced by a new leader….
Harken offers unlimited primary care and behavioral visits at no charge when members receive those services at its staff-run clinics. Other services are subject to a relatively high deductible, depending on the ACA metal tier. But members pay no coinsurance after the deductible is met, other than copays for prescription drugs. And beyond primary care, members have access to UnitedHealth’s broad national network of hospitals and specialists.
They were losing over $150 Per Member Per Month (PMPM). That is insanely high losses.
I have not been able to figure out who insurers who are pitching high touch products in markets that are dominated by Medicaid like Exchange carriers can make it work. We looked at this problem in May:
The market segment that both of these plans seem to be aiming for are people who are fairly young, active, technologically savvy and very healthy.
There is no problem with insurers segmenting a market and chasing one segment really hard. Even with risk adjustment where plans that are comparatively much healthier make transfer payments to companies whose population are comparatively sicker, plans can make money. Oscar in 2015 had massive risk adjustment liabilities. Slightly more than a quarter of their earned premium revenues went out the door as risk adjustment payments. This indicates that Oscar was disproportionately signing people up who were very low utilizers and were coded as very healthy. This could be fine. Given how Harken is marketing and pricing itself in the Chicago market, it seems likely it is attracting a similar type of risk profile (young and very healthy)
What I am struggling with is how do these types of insurers compete in markets where there is a large Medicaid Managed Care like Exchange insurer. In Chicago, Centene Ambetter’s unit is the dominant low cost insurer. It has a narrow network, Medicaid like HMO product as the 2nd Silver. An HMO will self select for healthier people than a PPO, and a very narrow network will select for healthier people than a not so narrow network. For a 40 year non-smoker, that plan costs $198 while the least expensive Harken plan costs $279. That is a subsidy gap of $81. Centene has been paying in significant risk adjustment transfers but it has been profitable….
Centene and other Medicaid like Exchange providers are targeting roughly the same type of population but since they are much cheaper post subsidy, they are probably getting a far larger population to amortize their fixed costs over plus any service that they do need to pay for, they are paying for at a lower rate.
From here, I am having a hard time seeing how plans that have a “lifestyle” component can compete against Medicaid like Exchange providers. Maybe it is different off-Exchange where everyone is paying full premium and “cheapness” is not a strong selling point.
Harken had a front end that was very attractive to people with chronic conditions. Unlimited, no cost sharing PCP visits are far more valuable to an individual with health problems then they are to someone who is healthy. I would use unlimited PCP visits to address soccer injuries and perhaps an upper respitory infection per year. An individual with complex cardiology conditions would use the PCP visits as an entry way to far more expensive specialist and in-patient care. And since Harken is using United Healthcare’s national insurance network, they are paying a high cost per service once their members leave the PCP clinic.
Secondly, Harken was competing in Chicago and Atlanta. Both regions have Centene/Ambetter offering Silver Spam strategies where the Centene offerings were the only affordable offerings to healthy and low income buyers. Centene’s strategy drove down the average cost of premium in the region which means the risk adjustment transfers that Centene was making to other carriers would be insufficient to cover high cost care.
I could not figure out how Harken could make money in markets where there was a Medicaid like Exchange carrier. And now we find out that they could not figure out how to make money either.
Another Scott
Thanks for reports like this.
Are there any national public numbers about insurers dropping areas/states pre-PPACA? We all remember stories from the ’90s and ’00s about 15-20+% annual price increases for policies, surely there were consequences for insurers and areas they covered back then as well (due to companies and individuals dropping out and the customer base drying up)?
Half-a-dozen high-profile announcements about insurers dropping areas/states is disconcerting, but if similar things happened pre-PPACA, it would put things in perspective…
Thanks.
Cheers,
Scott.
RealityBites
It is the time of year when many of us are signing up for our health insurance at work. Every price increase and every decrease of service will be blamed on “Obamacare”. Every office will have someone who knows “an authority” who works in health insurance who told them this. Do you have any good recommendations for sources of accurate information about the real reasons employer provided insurance is going up again?
Of course, it went up every year and covered less before the ACA, but that doesn’t really make the point.
I have heard a number of people say the ACA is destroying health insurance and it is one reason they won’t vote for HRC.
Also had someone tell me that Americans expect too much and are too spoiled and therefore god will destroy America. That person has been paying thousands of dollars a year to try to pay off uninsured medical debt. ? Thanks in advance for some good reference material.
Richard Mayhew
@RealityBites: this is a post for Monday
RealityBites
@Richard Mayhew: thanks!
StringOnAStick
I recall being surprised when ACA finally passed, like there had been all this adamant obstruction that suddenly just seemed to stop; I thought it was suspicious. Since then we’ve seen the court cases to try to kill it, and I feel like now the insurance companies are coming forward with their part of the “kill it by a thousand cuts” strategy. Doing the “gee, we tried but the numbers don’t work” dance – because they were never supposed to, one plan at a time, seems like part of strategy that’s working.
Arclite
Interesting. Obviously Single Payer can address something like this, but how can this be addressed in the current model?
Wesley
Harken has baffled me, and this step continues to do so. I live in one of their markets (Atlanta) and work for an insurer in Georgia – although we don’t really compete with Harken because my company only offers plans outside of the metro Atlanta area. They built all these primary care centers, but then didn’t require referrals through those centers to specialists, rather they just let you use the full United network that is mostly used by self-insured and fully insured large groups. The referral issue was going to be resolved in 2017 with their new rate filings, but it didn’t appear as though they built a narrow network. Kaiser also has a pretty decent presence in Atlanta, so someone who wants a staff model already has a proven name they will probably choose over a “startup.”
All that being said, I don’t see how they retain / gain the membership base to maintain the 6 primary centers they’ve built in Atlanta. – maybe they see it as a sunk cost at this point, so I’ll be shocked if they don’t shut down at the end of 2017. Which is a shame – I think with some patience, this kind of concept could actually work because while as Richard points out the problem of Medicaid-like plans that bring down statewide premium, there is also the benefit that Medicaid-like plans could also bring down statewide risk scores, which could make the risk adjustment math work. But that only works if you’ve medically managed your chronic population well – and a broad network with no primary care gatekeeper probably doesn’t do that.
However, they might be trying to make a play at the small group market; their rates are really quite competitive in 2017 (at least in Georgia), and that is a market United is a bit more experienced with.
Prescott Cactus
The doctors orders: Hooker et I Gram de ictu menstrua.
There’s your $150 loss.