All Eyes On UnitedHealth Group; Is ObamaCare Implosion Imminent?

The much feared “death spiral” of ObamaCare seems to be underway with the country’s largest health insurer, UnitedHealth Group, considering pulling out of the Affordable Care Act.

Stephen Hemsley, CEO of UnitedHealth Group, told investors in an earnings update last week that the company might not offer health coverage on the exchange during the 2017 open enrollment season, Phoenix Business Journal reported.

UnitedHealth Group said last week that it’s losing too much — $425 million — from policies sold on the health exchanges, as reported by the New York Post.

“We cannot sustain these losses,” Hemsley said. “We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.”

The New York-based insurance giant admits that if a major publicly traded insurer withdraws, others may follow suit and destabilize the entire individual market.

As to what causes this death spiral, Press Examiner explains that the healthcare exchanges have been signing up healthier segment of the population for several years, in turn subsidizing the higher costs of care for older, unhealthy patients. But with rising premiums, fewer consumers are willing to sign up, so that mostly high-risk (older, less-healthy) consumers stay behind, driving new losses. This spiral would continue until it is no longer financially sustainable.

Press Examiner further points out that according to the law, federal subsidies to help improve participation in the exchanges are expected to expire in 2017, meaning the insurance companies will need to find new ways to cover their costs.

If they are not able to get new consumers to sign up, they will have two options – hike premiums and deductible costs on existing customers or exit the healthcare exchanges altogether.

In case they opt for the latter, others in the business will be forced to carry the weight of rising costs across the sector, meaning that either even they will increase costs or will quit the exchanges as well, Garrett Baldwin of Press Examiner explained. That could ultimately cause the implosion of the Affordable Healthcare Act.