I was not surprised when United Healthcare pulled out of the Exchanges. I could not see how they could make money given the combination of their network and premiums.
TLDR: United Healthcare is losing money because they did not think their strategy through. Sucks to be them but this is not a systemic Exchange problem….
We know that the Exchanges are an extremely cost sensitive market…I would bet that United did fairly well in the eight markets where they had either the 1st or 2nd Silver. They’re getting killed in markets where their products are not price competitive…..United Healthcare is offering a product in my region. The network for their least expensive Silver (which is 10% more expensive than the benchmark Silver) is significantly broader than the networks of two competitors low price Silver options.
The New England Journal of Medicine has a very interesting article by Craig Garthwaite and John Graves** that provides a lot of support to my Exchange analysis and why United Healthcare and other insurers were in trouble on Exchange.
To examine more systematically whether poor insurer strategies may have contributed to market exits, we combined information on insurer participation in the marketplaces for the 34 states with available data for 2016 and 2017. These data included information on premiums, provider networks, and insurers’ local experience with other populations such as Medicaid beneficiaries. We used this information to investigate factors associated with a sustained presence in the ACA’s nascent insurance markets….
Our data show that the exiting plans offered an unappealing combination of smaller provider networks and higher premiums. For example, an unsubsidized 35-year-old person enrolled in one of the plans that was discontinued would have paid, on average, $16 more per month for a plan with 8% fewer local in-network hospitals than a similar person enrolled in a plan that was not discontinued….
In supplementary analyses, we also compared characteristics of insurers and plans entering the exchange market in 2017 and found that new plans had substantially lower premiums than their local competitors (premiums are $30 per month lower for a 35-year-old enrollee). Moreover, issuers of these new plans were more likely to have experience with Medicaid managed care but less likely to have direct experience in the markets they entered. This finding is consistent with the existence of a functioning market in which firms that were initially successful are moving into new geographic areas.
The one question I have is if there was a flag for co-ops as I think some of the results would change if we can stratify the data that way.
But the story Garthwaite and Graves tell is that firms that offered bad products with little experience in a comparable market and not a lot of experience actively managing population actuarial risk were far more likely to leave. Firms that offered low price, modestly broad networks with experience in fully insured risk managment and Medicaid managed care are more likely to survive and expand.
Or basically, firms that knew what they were doing and could offer decent products beat out firms that offered really bad values.
Is that shocking? No, it is market capitalism doing what it is designed to do.
**Garthwaite, Craig, and John A. Graves. “Success and Failure in the Insurance Exchanges.” New England Journal of Medicine (2017): n. pag. Web. 1 Feb. 2017.
A great example of how the exchanges are supposed to work is New York State’s exchanges. For the most part, I’ve been a Medicaid patient on them, but even the Medicaid folks get their choice of three private insurers, all of whom offer pretty broad networks in the Albany area, all of whom have somewhat different specialties. (One, for example, is better for “general” medicine, one better for mental health providers).
I ended up going with Capital District Physician’s Health Plan, CDPHP. They have a very broad network across Albany, despite the poor Medicaid reimbursement rates. For the most part, I’ve had no problem finding providers, though certain specialties (dermatology, psychiatry) were much tougher to find than others, that’s more a function of Medicaid then of the insurance company.
Normally, I would be quite noisy about inserting private middlemen into a program like Medicaid, but CDPHP has treated me very well for a health insurer – I’ve never failed to get a medical waiver, for example, for off-formulary medicines – and having a CDPHP card in contrast to a straight Medicaid card does help relieve some of the prejudice by medical providers against the “welfare bums”.
It comes down to an insurance company that knows what they are doing AND being in a blue state that, despite its wretched excuse for a governor and even more wretched excuse for a legislature, manages to take care of its own.
It will be nice when the focus shifts from insurance companies making money to citizens getting affordable healthcare. That’s how it is done in Canada and other western democracies. It’s a shame that the U.S. places insurance companies’ ability to make profits over affordable healthcare.
@Patricia Kayden: Not likely to happen in any of our lifetimes. Right now I’d just be happy to find out that the ACA is a one way rachet, and that the entire health care safety net isn’t about to be repealed, privatized, or block-granted.
OT: This has popped up on my FB feed a couple of times this morning. Apparently, the Southern Poverty Law Center is sending out this email:
We just learned that the Senate Committee on Homeland Security is taking calls about Steve Bannon’s appointment to the National Security Council (NSC).
We’re told that they’re tallying calls.
You might get a busy signal but try, try, try again all this weekend. Leave a message if you get through to voicemail.
The number: 202-224-4751
Be sure to tell the committee that you believe no individual whose primary responsibility is political in nature should be allowed on the NSC or authorized to attend its meetings. Partisan politics have no place in our national security.
Please also email the committee using this form.
Your friends at the SPLC
So market capitalism is doing what it’s supposed to do, darwinian selection of the companies that actually are competitive versus those that aren’t. And this will, of course, all be Socialism’s Fault.
This happens ridiculously often with them.
Major Major Major Major
Which means that Republicans will be against it, since they’re actually wannabe-strongman crony capitalists.
But it is not done the same way in all countries which have universal healthcare, and insurance companies are often still involved.
@Patricia Kayden: There’s definitely something to be said for democratic oversight of the health-care system. Canada, of course, has some problems of its own, which are partly related to the fact that in the absence of insurance companies, the balance of power in the system is held by the doctors’ professional associations, with the result that doctors are fairly scarce and also massively overpaid here by comparison with France or the UK.
(proximity to the clusterfuck that is the US system, which gives them the ultimate bargaining chip – “pay us more or we move to the USA” – certainly has a lot to do with that too)
@Patricia Kayden: I feel like I need to say this every time I read a comment like yours. The goal of universal access to health care is shared by every other advanced democracy, western or eastern (Japan) (and more than a few non- or under-developed democracies). But most countries, and nearly every large country, achieve this goal with some participation from private insurance, although this can be supplemental — e.g., UK, or primary, e.g., Switzerland. Canada and the Nordic countries are pretty much the only countries that bypass private insurance entirely. The problem I have with the way comments like yours come across, is that it gives Republicans a false argument — that the only way to ensure universal access is through a government take over of medical practice, which allows cheap, heartless bastards to pretend that their opposition to universal access is actually a virtuous position. There are many models for successfully achieving universal access. Most of these models involve some participation by private insurance companies.
@Barbara: Can I steal this comment ?
OT: don’t forget to donate whatever you can to the Bowling Green Massacre Fund.
“No, it is market capitalism doing what it is designed to do.”
yes, this! there’s this twisted notion that capitalism means always winning, when it’s supposed to have losers as well.
@David Anderson: Sure! I sent your link to the NEJM article to various parties.
Villago Delenda Est
Corporations hate free markets. They hate competition.
Cuts into the hookers and blow, ya know.
Yeppity yep. Great reply.
@Barbara: Canada’s system also doesn’t bypass private insurance completely, because the public system covers quite a lot less than what health insurance covers in the USA (though this is compensated by the prohibition on co-pays and deductibles). No drug coverage (except in BC and Quebec), no dental, not much in the way of mental health coverage, etc. Nearly any middle-class job will provide complementary insurance for all of that. Of course we also have to have travel insurance for going to the US since even though we can technically get reimbursed for medical expenses there, it’s at Canadian rates which are… somewhat lower. To put it mildly.
Interestingly enough, Quebec’s drug insurance plan looks a bit like what Obamacare would have looked if the public option had survived. I don’t think it’s a very good system because it guarantees that the government gets stuck with the most expensive cases, and our drug prices are actually higher than the rest of Canada, but it’s a useful point of comparison. I think BC has done a better job of getting most of its population into the public pharmacare system but it’s a long way away and I’ve never lived there!
Did you not want to tweet your post? Seems like an important topic since the republicans scream about the destruction of the markets every chance they get. It would be nice for folks to be prepared for the republican arguments in upcoming townhalls with their republican reps.
Is there one universal Canadian system, or are there any variations based on the … province?
United Healthcare offered products in my rural county on the Washington exchange for exactly one year. Their prices were good, but they hadn’t even signed up the county hospital’s medical center staff yet, which consist of most the doctors in the county. And then they pulled out of the state exchange. We mostly have non-profits in the state now.
@Brachiator: Each province runs its own system – your coverage transfers between provinces when you move, more or less like a driver’s license (in Quebec, at least, both cards renew at the same time and can be done at our equivalent of the DMV, in a masterpiece of surprisingly efficient bureaucracy). The federal government requires them to cover all “medically necessary” services free of charge. They don’t, however, define exactly what this set of services is and it does vary a bit by province. Also, some provinces charge premiums (usually $50/month for a single person or $100/month for a family) while others fund the system from income taxes, and occasionally through a regressive “health tax” or yearly premium that gets paid at tax time. There is a pretty good summary of it here.