Is ObamaCare Financially Fit?

ObamaCare is supposedly running very well if we are to believe those (liberals) who preach to us from Washington, D.C.  And yet, UnitedHealth Group, a major player in the world of health care insurance announced yesterday that it is dropping its participation in ObamaCare in 18 states.  That is a major statement by a major player and bears watching closely.

There is something amiss here since UnitedHealth is very good at what it does and it knows its business.  We are told about the wonderful uptake of ObamaCare by the government, but here is a giant in the business telling us it doesn’t want to play any longer, at least in 18 states.

There were subtle indications earlier that there might be an issue.  This past year during the peak of the open enrollment season, health insurance agents told me of a seeming issue in that UnitedHealth was not obliging the requests for information necessary to permit these agents to close sales of their products.  That action was directly opposite what would be expected and was opposite what UnitedHealth has done in earlier open enrollment periods.

Another interesting possibility is this:  the insurers were skittish about the lack of underwriting (the ability for the insurer to look into what the risks of insuring a certain person would be) in ObamaCare.  The officials originally told the insurers not to worry for ObamaCare also provided for retrospective reviews and additional money to be made available to assist those insurers that had gotten hit with heavier than expected claims.  I am not aware of any payments being made retrospectively, and that might also be a driving force for UnitedHealth to simply say, to heck with ObamaCare.  If you, the government, want us, the insurer, to blindly walk into mega claims issues without your help to offset “adverse selection”, we don’t want to play in your sandbox any longer.

“Adverse selection” is where the insurer is forced to take all comers without regard to health history and to take them at the regular premium rate paid by everyone.  Insurers can be turned upside down (pay more out than is taken in) if they get too many bad claims in the bargain.  The pool of uninsured people from which a large number of ObamaCare insureds came would’ve been very likely to include a significant number of bad risks.  I suspect this is what UnitedHealth is reacting to since it wants as much solid business as it can get, and bowing out of this marketplace is simply contrary to good business decision-making if it was profitable.

I would not be surprised to learn somewhere down the road that the government promise of help in defraying excess claims cost did not occur, or occurred but not in the order of magnitude necessary to make sense in a business setting.

There are quite a few much smaller entities in the ObamaCare world and they have not made any noise about similar issues.  It is possible those entities were not adversely impacted or that they had a much smaller share of the market and were able to ride out any bad claims impact, or at least delay the impact hoping that future business would be good business and help to offset the bad business.  In some cases, these entities seemed ill-prepared to enter into this jungle given size and financial capacity.  This reminds me of the early days of health maintenance organizations when HMOs that were hit by excess claims were given financial relief.

Frankly, if UnitedHealth is unable to sustain itself in the Obamacare marketplaces, I don’t see how any other company could do so either.   These guys are pros and have or had a ton of money behind them.

This whole scheme, ObamaCare, has been troubling for me since its inception.  It was simply too good to be true, and it came from a government that seemed only to want to give stuff away to perpetuate its existence.

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