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Study: Few Premiums to Rise If United Drops Out of Exchanges

By Erin Mershon, CQ Roll Call

April 18, 2016 -- UnitedHealth Group's potential withdrawal from the federal health insurance exchanges would have a limited effect nationally but could significantly affect premiums and competition in certain counties, according to a new study by the nonpartisan Kaiser Family Foundation.

The nation's largest health insurer has repeatedly broadcast its unhappiness with the exchanges after disclosing millions of dollars in losses from that part of its business in November. The company already announced it's leaving marketplaces in Arkansas, Georgia, and Michigan and could still withdraw from some or all of the 31 other state exchanges in which it participates. UnitedHealth executives are expected to address the issue on a quarterly earnings call Tuesday.

Kaiser found that the insurer's withdrawal wouldn't drastically affect competition in most of the markets created by the 2010 health care law. Despite its dominance in employer-sponsored insurance, United isn't the primary conduit for people buying coverage on their own. However, in about 34 percent of counties, a United exit would drop the number of participating insurers below three, the number generally considered sufficient for competition. That means about 2.9 million people enrolled in exchanges would find themselves in markets with just one or two options, the study found.

That decrease in marketplace competition would affect premiums most in Alabama, Arizona, Iowa, Nebraska, and North Carolina, the study found. Nationally, however, premiums for the second-cheapest silver plan, a common benchmark, would rise by just 1 percent on average.

"In many ways, United has not been seen as an important player on the exchanges. Nationally, on average, United's exit would have a very modest effect," said Cynthia Cox, an associate director for the Kaiser Family Foundation Program for the Study of Health Reform and Private Insurance. She added that the effect would be very different in certain markets where United offered an especially low-cost option, or was the only insurer offering plans.

Still, United's losses and withdrawals doesn't necessarily portend trouble for other insurers, she said.

"United is unique and it is one of the first large established insurers to make these sort of announcements. I don't think they are characteristic of other large insurers that have been participating on the exchange," she said.

A spokesman for the Department of Health and Human Services, Ben Wakana, said the report highlights how small a player United is on the federal exchanges. United has enrolled about 6 percent of exchange customers.

"As with any new market, we expect changes and adjustments in the early years with issuers both entering and exiting states," he said in an email. "It's clear that this is a growing business for insurers, and it's a product consumers want and need. The Marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer. That data shows that the future of the Marketplace remains strong."

He also said that so far, the markets United has exited were places where the company had priced its plans higher than competitors'.

Cox agreed that United plans were often more expensive than competitors' in Arkansas and Michigan, but said there were some counties in Georgia where United offered the lowest-cost plan or even was the only insurer. Harken Health, a United subsidiary, will continue to participate in some parts of that state.

A United spokesman declined to comment on the study.

In its analysis, Kaiser assumed no new players will enter markets where United is currently participating.

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