UnitedHealth Leaving The Exchanges Means Consumers Will Have Fewer Options

A couple of months ago, America's largest insurance company, UnitedHealth Group, announced that it is reducing its efforts to attract customers to its insurance exchanges products under the Affordable Care Act. Moreover, UnitedHealth stated that it may withdraw its participation in the exchanges after 2016. The company said this move was due to the uncertain financial future facing the exchanges.

Competition in the health insurance market matters. UnitedHealth is the fourth largest insurer on the exchanges with 550,00 enrollees. UnitedHealth's possible withdrawal from participation in the exchanges would reduce competition in health insurance markets, which are already highly concentrated. A recent study by the Kaiser Family Foundation found that in 2016, 40% of counties in states using Healthcare.gov will only have one or two health insurers offering coverage, a 5% increase from 2015. In countries with fewer than three insurers, consumers "may not benefit from insurer market competition to hold down premiums or offer plans with better value."

This news comes during the proposed mergers of the four other dominant, national insurers Anthem-Cigna and Aetna-Humana. Currently, Aetna, Anthem, Cigna, and Humana are still participating on the exchanges, and in fact Anthem (#1), Aetna (#2), and Humana (#3) are the three largest insurers on the exchanges. However, post-mergers, consumers will lose an additional two insurance plan options further reducing consumer choice and likely leading to higher prices.

This announcement provides further evidence that health insurance competition is broken. With a majority of the CO-OPs failing, UnitedHealth's possible withdrawal from the exchanges along with the proposed mergers of Anthem-Cigna and Aetna-Humana means consumers will have extremely limited options come 2017.