UHC drops California like a pile of poop.
California Insurance Commissioner Dave Jones expressed concerned in a news release from his office that United Healthcare had announced it was pulling out of the individual health insurance market in the state.
“United Healthcare’s decision to exit the California individual health insurance market is bad news for consumers,” said Commissioner Jones. “While both United Healthcare and Aetna have a very small share of California’s individual health insurance market, their departure means less choice, less competition, and more market consolidation by the remaining big three health insurers – Anthem Blue Cross, Blue Shield of California, and Kaiser – which means an increased likelihood of even higher prices from those health insurers downstream.” – C0mmissioner Jones
Neither the departure of United Health Care (UHC) or the previously announced Aetna closure of individual plans is much of a loss to California in terms of competition. Combined, the companies had less than an estimated 70,000 enrolled members. If the UHC rates on individual plans were anything like Aetna’s, they didn’t offer much competition in the first place.
While Commissioner Jones is worried about competition, he recently called for a ban on Anthem Blue Cross from participating in the Covered California small business health insurance group plans. You can’t bemoan a small market share holder like UHC pulling out of the market and potentially reducing competition while calling for a ban on one of the largest insurance carriers in the state, which has some of the most competitive rates, and look credible about predicting the competitive forces in the market.
While some industry analysts point a finger at new guarantee issue rules for individual plans as a reason UHC and Aetna are vacating California, both are still retaining their lines of employer group business which IS ALL GUARANTEE ISSUE. Commissioner Jones is assigning the blame on special tax breaks some of the other carriers receive.
“One of the factors I believe contributed to this decision, even if the two companies are disinclined to acknowledge it, is the special tax break that California law gives to Anthem Blue Cross and Blue Shield, which has allowed and continues to allow those two companies to avoid paying $100 million in state taxes a year,” added Commissioner Jones. “Aetna and United Healthcare don’t get the special tax break provided to Anthem Blue Cross and Blue Shield, and so they faced a major competitive disadvantage in California.” – Commissioner Jones
While the tax situation no doubt was a factor in the decision making process, we only have to look at the comments reported in Bloomberg News about what UHC Chief Executive Officer Stephen Helmsley told investors last October –
The company’s plans reflect its concern that the first wave of newly insured customers under the law may be the costliest, Hemsley said. UnitedHealth will “watch and see” how the exchanges evolve and expects the first enrollees will have “a pent-up appetite” for medical care, Hemsley said. “We are approaching them with some degree of caution because of that.”
It doesn’t take actuary to figure out that “watch and see” is equivalent to letting the first wave of insurers take the losses on the pent up demand for medical care so UHC doesn’t have to. After the market and the health of our U.S. citizens stabilizes, UHC and Aetna will come back into the market to make money.
It is rather disheartening that UHC and Aetna have taken such a cynical profit driven approach to the individual market in California and in other states. Both of these companies have great IT infrastructures for enrolling and servicing their members. They are the sort of “military defense contractors” the U.S. market needs to lend experience and expertise during this period of difficult transition to a new health care and insurance market place.
The answer we received from both Aetna and UHC about the challenges in the health insurance market was one of “cut and run”. When the going got tough, they decided to run and protect their profits instead of working to help American families. Unfortunately, the public has a short memory and probably will not punish either insurer when they re-enter the market a couple years from now.
This would be a good time for Covered California or Department of Insurance to seek putting a moratorium of several years before a company can come back into California after dropping their business. We don’t need profiteers and fair weather friends that only see California as a profit center. Please reward those insurers that have chosen to participate in the new Covered California state health insurance marketplace. They are taking a gamble that even with the inevitable rough spots, health care reform will be better for people and business in the long run.
Full test of Commissioner Jones News Release
“United Healthcare’s decision to exit the California individual health insurance market is bad news for consumers,” said Commissioner Jones. “While both United Healthcare and Aetna have a very small share of California’s individual health insurance market, their departure means less choice, less competition, and more market consolidation by the remaining big three health insurers – Anthem Blue Cross, Blue Shield of California, and Kaiser – which means an increased likelihood of even higher prices from those health insurers downstream.”
“One of the factors I believe contributed to this decision, even if the two companies are disinclined to acknowledge it, is the special tax break that California law gives to Anthem Blue Cross and Blue Shield, which has allowed and continues to allow those two companies to avoid paying $100 million in state taxes a year,” added Commissioner Jones. “Aetna and United Healthcare don’t get the special tax break provided to Anthem Blue Cross and Blue Shield, and so they faced a major competitive disadvantage in California.”
Aetna had approximately 60,000 people covered by individual policies as of March 31, 2013, and it projects it will have approximately 50,000 people covered by individual policies at the end of 2013, when the company exits the individual market. United Healthcare, through its subsidiary PacifiCare, had approximately 10,000 individual policyholders late in 2012. Policyholders from both companies have been informed they can keep their existing health insurance untilDecember 31, 2013. Aetna and United Healthcare policyholders will be able to purchase health insurance from other health insurers inside and outside the new California health benefits exchange.
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