Final UnitedHealthcare Dropout Odometer Total: 31 (but plus Utah, sort of)

Back in mid-April, I posted the UnitedHealthcare State Dropout Odometer, which tracked exactly which of the 34 states which UnitedHealthcare is currently offering individual market policies in this year they'd drop out of for 2017. Instead of simply stating "we're sticking around in these states and dropping out of the rest", United decided to dole the pain out gradually, with states announcing their departure one by one over several weeks. For quite awhile, I knew that they were sticking around Nevada, New York and Virginia, with another half-dozen states in limbo status.

Today, according to the Chicago Tribune and the Minnesota Star Tribune, it looks like those three are it: They'll still be available in those 3 states, but are pulling out of the other 31 (including California, where they only have around 1,200 current enrollees via the exchange anyway). OK, that sucks, but we kind of knew about this already; it's old news for the most part.

However, thanks to InsureBlog for this mildly interesting tidbit:

From UHC via email:

"Next year UnitedHealthcare will offer individual plans through the Exchange in a limited number of states. This change in market footprint reflects our longstanding goal to offer products that are both affordable for consumers and financially sustainable for our company."

Which is surprising enough (given the on-Exchange losses), but then there's also this:

"After a detailed review ... we have determined that we will not offer individual Off-Exchange plans in 2017 except in the state of Utah. These changes reflect our longstanding goal to offer consumers products that are both affordable and financially sustainable."

Frankly, this surprises me: I would have thought that it would be the other way around.

I agree, this is very curious; I, too, would expect insurers to be more likely to stick around in the off-exchange market while abandoning the on-exchange market, for a simple reason: 85% of exchange-based enrollees receive tax credits, while off-exchange enrollees have to pay full price.

Why does this matter from the carrier's POV? Simple: In aggregate, those who have to pay full price for their healthcare policies are, by definition, almost certainly going to have a substantially higher income than exchange enrollees. 98% of exchange-based enrollees were below 400% of the Federal Poverty Level, while the vast majority of the off-exchange enrollees will have incomes near or above 400% of the FPL, or around $97K for a family of 4. I say "vast majority" because there are still a lot of people below 400% FPL who are paying through the nose for off-exchange policies who aren't aware that they qualify for tax credits if they sign up through the exchanges, but overall this is a pretty easy way for carriers to effectively discriminate against customers based on their income.

In many ways, this is an even more simple version of what some carriers started doing last year by playing games with their broker commission structure. As Sabrina Corlette explained back in December:

Most health actuaries will tell you that gold plans, because they come with lower deductibles and out-of-pocket costs at the point of service, tend to attract older, sicker customers than bronze and silver plans. Before the ACA, these were the type of enrollees insurers could avoid by simply denying them a policy or charging them an exorbitant price. Now that those practices are prohibited, some insurers may be using marketing tactics – by way of broker commissions – to achieve the same result.

How is this impermissible? The Federal law is pretty clear: insurers “cannot employ marketing practices…that will have the effect of discouraging the enrollment of individuals with significant health needs in health insurance coverage…” It’s hard to see here how discouraging enrollment in gold level plans wouldn’t have the effect of discouraging the enrollment of people with health care needs.

By offering higher commissions (or offering commissions at all) on the lower-end policies while stripping down (or killing off completely) commissions on the higher-end policies, insurance carriers are still able to manipulate their enrollee base, just not in as direct a fashion as they could pre-ACA. The on-exchange/off-exchange thing is an even easier way of doing so: On exchange = Lower income; off-exchange = higher income.

Now, it doesn't necessarily follow that just because someone has a higher income, they're automatically in better shape. However, in aggregate, I'm going to assume that this is the case, and it makes sense for a number of reasons. It's also safe to assume that higher-income enrollees have a more stable income, which means they're more likely to have automatic bill payments and the like set up, so are lower risks for missing payments, cancelling policies early and so forth.

This is why it's surprising to see UnitedHealthcare offering policies on exchange in 3 states but off exchange in only one. You'd think that after getting burnt on the exchanges so badly the past 2 years that they'd either wash their hands of the indy market completely or focus on the off-exchange market, but instead it's the other way around. Huh.