Affordable Care Act Increases Market Competition, and United Isn’t Happy About It
By AIS Staff - May 2, 2014

At its core, the Affordable Care Act (ACA) was designed to get more Americans health insurance. And in lieu of a single-payer system, the way this goal is to be accomplished is to increase competition amongst insurers. New York’s small-group insurance market could be an example of the ACA’s success at this, by drawing new competitors, and luring back former players, to health insurance markets. But, as detailed in the April 28 issue of Health Plan Week (HPW), one existing competitor isn’t very happy with the resulting rate-setting practices.

You might want to break out your tiniest violins for this.

UnitedHealth Group told investors that during the first quarter, it saw “intensified pricing in several markets, including small group in New York, a large market for us,” according to CEO Stephen Hemsley. Speaking during an April 17 conference call to discuss first-quarter 2014 financial results, he said, “We believe several carriers there, including new entrants, are pricing well below cost and what we would view as unsustainable pricing levels.” The insurer warned that if the situation continues, it could affect United’s risk-based membership level — but not its profitability, as the insurer is not adjusting premiums to compete with the other carriers.

Jeff Alter, CEO of UnitedHealthcare’s Employer and Individual business unit, pointed to two factors: (1) “new entrants into that marketplace that in our opinion clearly underpriced what the cost structure is in New York — not only our cost structure but certainly their cost structure,” and (2) “competitors that have left the New York marketplace that chose to re-enter the marketplace in January ‘14.” Those players also “underpriced for what the economics would call for,” he said.

Kyle Kautzmann, GBA, an insurance broker with EBNY Insurance Services, Inc., confirmed to HPW that “the new players are definitely undercutting [the market].” But, he says, existing players also are changing plans to comply with the ACA, so premiums are going up overall. “I think Oxford [a UnitedHealthcare subsidiary] is still going to get lot of the market.” And, overall, United isn’t faring too poorly, as it still has the leading share of New York’s commercial risk membership, according to AIS’s Directory of Health Plans: 2014, taking more than 33% of it.

So is this much ado about nothing? Or does United have legitimate cause for concern? Do you agree that its competitors’ rate setting practices are unsustainable? Read the HPW article and let us know what you think in the comments.

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