Premiums for exchange plans in many states are set to increase anywhere from slightly to significantly, but there's new competitive pressure coming as the nation's largest insurer starts flooding markets.
After selling subsidized exchange plans in just five states last year, UnitedHealth Group executives are now set to expand to as many as two dozen states for the upcoming 2015 plan year. The move could send small shock waves across exchange markets, influencing future premium decisions of regional and national competitors while netting UnitedHealthcare more members, particularly in the individual market.
One of the states United is expanding in is Alabama, where it recently filed intentions to sell individual qualified health plans in all 67 counties through Healthcare.gov, the federally-facilitated exchange. Statewide, United will be going toe-to-toe with Blue Cross and Blue Shield of Alabama -- which claims a roughly 90 percent market share -- and, in three counties, Humana.
Another is Washington State, where United is one of four insurers that will be new to the exchange. Those four will bring the total number to 12 insurers across the state and make it among the most crowded. Likewise in Indiana, United is among four insurers set to enter the exchange market. There, in WellPoint's home field, the number of exchange insurers is set to double to eight.
The decision to expand in exchange markets comes after United cautiously entered five state exchanges during the first open enrollment period -- and after its Optum subsidiary did a great deal of work repairing the troubled technology behind Healthcare.gov and several state exchanges.
"This was consistent with how we positioned this right from the beginning," said UnitedHealth Group president and CEO Stephen Hemsley, in a conference call about the company's second quarter results. "We would observe the first year, for the most part, and then endeavor to participate. We will see how we ultimately participate as we go through the balance of this year and get ready for next year's selling season."
Impact on the market
Since the advent of the Affordable Care Act, the company has seen subsidized exchanges as part of the future of its business, and after a year, said executive VP Gail Boudreaux, "we know the existing pricing, we know the network constructs, we know the consumer behavior on what they picked in the these markets, we have a better understanding of the regulatory structure and distribution patterns."
Despite the uncertainties and challenges -- such as the reinsurance and risk adjustment programs -- "this is a good long-term market," said Boudreaux, who heads the UnitedHealthcare division.
United's expansion in exchanges will certainly bring new choices to consumers and probably help keep premiums in check; some economists think the insurance giant's presence would have meant more affordable options last year, had its plans been available.
A recent study in the National Bureau of Economic Research concluded that if UnitedHealthcare had sold subsidized exchange plans in all the states it already sold individual plans in, premiums for the second lowest-cost silver plans would have been at least 5.4 percent less expensive on average.
United's expansion in exchanges will be an opportunity to boost membership after some small declines related to exits of certain markets amid the ACA transition, such as California's individual market last June.
As of December 2013, United covered 45.4 million individuals across its segments -- 30.1 million in commercial plans, 10.4 million in Medicaid and Medicare, 4.8 million in international plans -- and as of the second quarter ended this year, that's down a bit to 44.9 million, with the steepest decline in commercial plans, to 28.8 million, an increase in public plans, to 11.3 million, and international membership holding steady.
In United's second quarter results -- the first of the major publicly-traded insurers to report -- the company raised its revenue forecast by more than $1 billion to $130 billion, largely due to growth in Medicaid managed care and Medicare Advantage.
Second quarter revenues grew 7 percent year-over-year, to $32.6 billion, with earnings from operations up 8 percent, to $2.6 billion.