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UnitedHealth Report Stirs Alarm About Obamacare Exchanges

By Rebecca Adams, CQ Roll Call

November 19, 2015 -- Health policy analysts and lobbyists were split on Thursday over whether the announcement by the nation's largest insurer that it may withdraw from health law insurance marketplaces in 2017 signals broader problems with the viability of the exchanges.

UnitedHealth Group lowered its expectations for earnings on Thursday, blaming higher-than-expected medical claims from the approximately 550,000 people it covers through the marketplaces created by the 2010 overhaul. Some patients enroll to receive medical care and drop coverage later, company officials said.

"In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated," said Stephen J. Hemsley, chief executive officer of UnitedHealth Group, in a statement.

While United is not a dominant insurer in the marketplaces, lobbyists warned that other health plans face similar risks. Insurance companies are eyeing 2017 as a pivotal year because two financial protections that have limited insurers' losses will be expiring.

Administration officials already announced last month that one of those programs, the so-called risk corridors system, would not operate as intended. The program limits profits and losses for insurers offering coverage in the marketplaces. Lawmakers designed it to shift money from insurers with gains above a certain threshold to those with deficits beyond a certain cap.

Congressional Republicans had passed legislation in the fiscal 2015 spending package (PL 113-235) that blocked the Obama administration from tapping other federal funds to fund the program. In October, the Centers for Medicare and Medicaid Services (CMS) announced a $2.5 billion shortfall in the program and a subsequent 87 percent reduction in expected payments to insurers with losses.

As a result, many nonprofit co-op plans have failed and some other insurers are struggling. America's Health Insurance Plans spokeswoman Clare Krusing said the shortfall is causing some other plans to re-evaluate whether they will be able to keep offering coverage.

"We've been very clear with the Administration about the serious challenges facing consumers and health plans in this Exchange market," said AHIP president and CEO Marilyn Tavenner in a statement. "When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result.

Tavenner, who until February was the administrator of CMS, said that "nearly 800,000 Americans have faced coverage disruptions as a result of the significant and unexpected shortfall." That includes people who are losing coverage because they were enrolled in either a co-op plan or other type of insurance plan that will not be continued.

Health and Human Services Secretary Sylvia Mathews Burwell has said she expects that about 10 million people will have enrolled and paid their premiums in the state and federal exchanges by the end of 2016, about half of previous Congressional Budget Office estimates and less than one million more people than in late 2015.

Tough Environment

The administration insisted that the marketplace remains stable.

"The Health Insurance Marketplace is entering its third year and continues to grow, giving millions of Americans access to quality affordable insurance," said CMS spokesman Aaron Albright. "Tens of thousands more Americans turn to the Health Insurance Marketplace for health coverage and even more return to the Marketplace for another year. In fact, about 9 out of 10 returning consumers will be able to choose from 3 or more insurers for 2016 coverage."

However, insurers are operating in an environment in which health care costs are rising at a faster clip than a couple of years ago and enrollment in the marketplaces has not been as robust as some plans predicted.

"The market dynamics mean that the administration is going to have to figure out what they can do to create more stability," said Dan Mendelson, the president of the Avalere consulting firm and a former Clinton administration health budget official.

The threat to withdraw by United, which is already reducing publicity about its marketplace plans, adds pressure on the administration.

CMS officials potentially could tweak other protections for insurers, such as a permanent program that bases insurance payments in part based on the health of the people enrolled. The administration also may be able to give insurers more discretion in the design of their benefits.

The best way to ensure the sustainability of the marketplaces would be for Congress to assist the administration in revising the law, much as lawmakers did for several years after Medicare cuts in the 1997 Balanced Budget Act (PL 105-33) struck home health agencies and other providers too deeply. "But when half of Congress is gunning for the law, that's just not going to happen," said Mendelson in an interview.

"One company doesn't tank the program but if they don't do something to stabilize the market, it's going to shrink and become more of a subsidized, specialized low-income program and that was not the intent of the law," he said. "The goal was to have a robust private insurance market for individuals in the U.S."

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