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Author Topic: United Healthcare bailing out
Rafi
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This is big. United Healthcare, nation’s single largest provider of health insurance announced that it may choose to stop offering individual coverage through the exchanges after 2016, and will “pull back on its marketing efforts” immediately in this market. For those unfamiliar with corporate ways, the "pull back" announcement is the method used to signal a planned course of action so investors will not react with surprise when it happens.

United is pulling out because it projects a $200 million loss in 2016 and the corporate welfare designed to entice insurance companies ends starting in 2017 - which translates to even larger losses then. Consequently, it cannot remain in the exchange.

With the largest reviser bailing out, that'll leave people to either choose a life of crime or move to another, more expensive, provider. And it will be more expensive since the remaining provides will have to absorb the high risk enrolled left behind as well as lost their corporate welfare support.

It's another rung down the death spiral for obamacare, it can't happen soon enough. [Big Grin]

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Greg Davidson
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Rati,

Go look at the thread of how many times the anti-Obamacare arguments have been false. Own up to how wrong you have been in the past. Then maybe you will be worth listening to.

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Rafi
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I know, lots of anger. I don't blame you for getting upset like that. Obama is too:
quote:
Thursday, just hours after giant insurer UnitedHealthcare said it’s losing money selling ObamaCare plans and will likely exit the health exchanges next year, the Obama administration quietly promised to bail out insurers for their losses....
Losses are around $2.6 billion right now nd climbing. If the promise Obama made is done via constitutional means, he'll have to get Paul Ryan to go along with the funding.

For the first time since this abortion of a program went into action, I'm feeling optimistic. [Big Grin]

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AI Wessex
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Not really, you've been almost giddy with the possibilities for its imminent demise since the day it went into law. Drugs would give you a similar sort of gratification far more predictably and much more quickly.
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Greg Davidson
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Obamacare was built on a basis of market competition. If this system is working, one expectation is that companies would have differential levels of success, and the least successful companies would drop out. That's how a competitive marketplace works.

So now we have learned that a company with 5% market share is having problems with profitability. And so it hasn't even said that it is dropping out, but that it may consider dropping out. This sounds more like a publicity campaign by the least efficient company in the marketplace (got to have something to tell the shareholders).

Zero evidence of death spiral.

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JoshCrow
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Doesn't it seem obvious that United's delayed entry into the market (they waited a year) meant that they weren't there when the initial rush of sign-ups happened?

It looks like they made a bad call and are paying for it.

I don't see how this is different from most market situations.

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Rafi
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quote:
Obamacare was built on a basis of market competition.
clearly you don't understand what market competition means.
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Rafi
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quote:
Originally posted by JoshCrow:
Doesn't it seem obvious that United's delayed entry into the market (they waited a year) meant that they weren't there when the initial rush of sign-ups happened?

It looks like they made a bad call and are paying for it.

I don't see how this is different from most market situations.

Come on, really? Massive government program with billions in corporate welfare to offset the massive losses and you don't see any difference from other actual market situations?

UH is losing 100's of millions, everybody in this train wreck is - just as anyone with basic math skills told us they would. It needs billions in corporate welfare to prop it up and still it's a loser.

In most market situations, losing hundred of millions would be a deal breaker but, obviously, this is the furthest thing from most market situations.

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NobleHunter
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Pity Obamacare didn't use the far more sensible single-payer system or even just including a public option.
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AI Wessex
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That's the inevitable end game. States are having second thoughts about opting out already, so the reluctant movement in that direction is making its slow way. There will be resistance at every new step, more screeching at every piece of negative news, but it will become increasingly a fringe hysteria.

One sign of that is that the best any GOP candidate can do now is promise to repeal it. None have revealed any new thoughts on what to do after that. That's a sure sign that like Benghazi! and The South Shall Rise Again!, it's just a rallying cry and not a meaningful policy declaration.

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Pete at Home
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"know, lots of anger. I don't blame you for getting upset like that"

Hmm, lots of smugness. You two deserve a long life together.

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The Drake
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quote:
Originally posted by Rafi:
United is pulling out because it projects a $200 million loss in 2016 and the corporate welfare designed to entice insurance companies ends starting in 2017 - which translates to even larger losses then. Consequently, it cannot remain in the exchange.

UnitedHealth Group doesn't look like it is losing money, although they did mention exchange product pressure that reduces their profit by $0.26, representing about a 4% reduction.

quote:
UnitedHealth Group Provides 2015 Earnings Update, Initial 2016 View

Revises 2015 EPS Outlook to Approximately $6.00 Per Share

Expects $425 Million or $0.26 Per Share Reduction in Fourth Quarter 2015 Earnings Driven by 2015 and 2016 Individual Exchange Product Pressure

Projects Earnings of $7.10 to $7.30 Per Share in 2016

Of course, this was their story a month earlier:

quote:
CEO Stephen Hemsley said in an October earnings call that the company had a "pretty favorable experience" on the exchanges in the first half of 2015. UnitedHealth boosted its Obamacare presence for 2016, expanding to 11 new markets.

"Going forward in 2016 ... I think we'll see strikingly better performance on the insurance exchange business," Dave Wichmann, UnitedHealth's chief financial officer, said on the call.

Feels a lot like they are looking for a scapegoat on something that isn't working, but at the same time I wouldn't be surprised that profit drops compared to their traditional business. They now have to compete for consumer choice, and marketing to a broad spectrum of individuals who need services, rather than selling B2B with large companies interested in controlling costs, as well as serving a pool of people who are generally more poor which typically tracks to less healthy.

Meanwhile the average number of insurers per state has risen to 10, up from 8 over the past two years, indicating that there does not seem to be an exodus from the program.

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The Drake
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Full disclosure: I am a participant in the exchange program without which I would likely not have insurance. Nonetheless, I stand by my analysis.
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Pyrtolin
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Insurers experiencing price pressure because competition prevents them from raising rates to simply stick the cost to customers is part of the market actually functioning as a market. It wouldn't be surprising at all if, in the short term insurers risked losing money. It's exactly that risk that will force them, in turn, to put pressure on providers to get costs under control and implement better and more cost effective practices.

If the complaint here is effectively "We can't soak the market for profit anymore because it's too competitive" then that's a mark in favor of the the system improving market health and forcing companies to find ways to offer better service at lower costs in order to stay in the game.

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Greg Davidson
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I had a discussion on Facebook with a conservative friend in Arizona who is having a terrible time with his insurance purchased on the ACA exchange in that state. Badly run state exchanges can reinforce the impression that the ACA is bad, when in fact it is due to having a down-side to giving more power to the states (namely, in many Republican-led states, the government is less competent than in Democratic-led states such as California, or they are intentionally under-serving their constituents because Republicans can benefit politically from resentment against bad government, even when they are the cause)
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Seriati
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quote:
Originally posted by Greg Davidson:
Go look at the thread of how many times the anti-Obamacare arguments have been false. Own up to how wrong you have been in the past. Then maybe you will be worth listening to.

So because you feel that the incorrectness of solicited predictions was not acknowledged, you somehow feel entitled to ignore the substance of claims made?

Are you going to go back and acknowledge every time I've demonstrated where you've overstated your claims?
quote:
Obamacare was built on a basis of market competition. If this system is working, one expectation is that companies would have differential levels of success, and the least successful companies would drop out. That's how a competitive marketplace works.
Obamacare pays lip service to market competition but there is no actual functioning market mechanism involved. It's central planning from start to finish. Insurers have to apply to the government for acceptable products (ie can't control their own costs), apply for specific rates and rate increases (can't control their own prices) and have massive redistributionist policies in their favor to smooth it out.
quote:
So now we have learned that a company with 5% market share is having problems with profitability.
No what you have is an entire fake market place that set premiums too low. The specific events that triggered this claim by United, were related to the Risk Corridor underpayment and the collapse of multiple insurance cooperatives.

As you may or may not know, the Risk Corridor payments were supposed to be from insurers that overcharged to those that undercharged premiums, thereby smoothing the premium judgements in a brand new market. The problem is virtually all premiums were undercharged, and almost no money way put in from overcharged premiums leading to all the claims from the undercharged group not being satisfied. The same trend put the cooperatives under, they didn't charge the premiums necessary to operate.

Now the premiums are already set for next year, which means this new data was too late to allow for a market correction, which means there will be another year of underwater performance. And, wait for it.... a need for MASSIVE premium increases for 2017 (gee wonder why we didn't see them for the election year?).
quote:
And so it hasn't even said that it is dropping out, but that it may consider dropping out. This sounds more like a publicity campaign by the least efficient company in the marketplace (got to have something to tell the shareholders).
Possible, possible too that it's gamesmanship, but far more likely if you looked at the actual issues and numbers that it's just a precursor of either (1) hidden or public government bailouts (putting a lie to the market theory you're claiming) or (2) even more drop outs and collapses.

By the way, we're already seeing government pressure to reduce testing and limit costs - remember how we said quality would have to drop.
quote:
Zero evidence of death spiral.
True. But meaningless. Whether there is a death spiral is completely dependent on whether the government lets there be one, not on any rationale economic test.

Plenty of evidence that the profitability is not there, plenty of evidence that even with heavy subsidies the premiums are unsustainable, plenty of evidence that it's a poor economic choice for anyone who is not very sick, plenty of evidence that unless you are completely subsidized it still leaves you with unsustainable medical costs.
quote:
Originally posted by the Drake:
UnitedHealth Group doesn't look like it is losing money, although they did mention exchange product pressure that reduces their profit by $0.26, representing about a 4% reduction.

Are you confusing their group returns with their losses on the exchange product?
quote:
Of course, this was their story a month earlier:
Prior to the Risk Corridor situation being clarified? Prior to the realization that the subsidies that allow their premiums to be barely unprofitable where not going to be paid, the premiums can't be increased, and not enough new healthy people were going to be added?

Seriously, can't imagine why they would have a change of view.
quote:
They now have to compete for consumer choice, and marketing to a broad spectrum of individuals who need services, rather than selling B2B with large companies interested in controlling costs, as well as serving a pool of people who are generally more poor which typically tracks to less healthy.
I don't get how you can right that, and yet seem to be asserting this is a good business, or not understand why a company might look at the situation and want out. You literally just said the exchange market is a bad bet.
quote:
Originally posted by Pyrtolin:
Insurers experiencing price pressure because competition prevents them from raising rates to simply stick the cost to customers is part of the market actually functioning as a market.

Lol, its government restrictions and central planning that prevents them from raising rates not competition. Change the law so they can put their rates where they want without government interference and they'll change them tomorrow.

It's funny too the idea that its wrong to "stick the cost to consumers" in a collective payment product. There is no money but what the consumers put in, it has to be bigger than payouts PERIOD. The fact that insurance companies are giant parasites is well known, but its a reality that means the cost of the parasite has to be paid as well. Paying medical costs by insurance company always means that the money in will be reduced by those expenses, the money out still can not exceed the total.
quote:
It wouldn't be surprising at all if, in the short term insurers risked losing money. It's exactly that risk that will force them, in turn, to put pressure on providers to get costs under control and implement better and more cost effective practices.
Frankly I find it laughable that you believe this mechanism is somehow not in operation today. The insurance companies have had massive financial incentives to bleed the providers for as long as I can remember. There is no more gain from this pressure to be had because the Obamacare market underpays actual costs.

But hey, so be it, thank you for your unwitting admission that quality of care must be reduced so we can all have "quality" insurance.
quote:
If the complaint here is effectively "We can't soak the market for profit anymore because it's too competitive" then that's a mark in favor of the the system improving market health and forcing companies to find ways to offer better service at lower costs in order to stay in the game.
If? No, that's the not the complaint. If the argument you are making is that Pyrtolin is ignoring the facts, then that's just another mark in favor of Seriati being absolutely right once more.

[ November 25, 2015, 05:26 PM: Message edited by: Seriati ]

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The Drake
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Seriati, your replies to my points are reasonable, but it will take me a minute to respond because it's going to be incoherent if I try to respond by mobile device out of context.
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Pyrtolin
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quote:
Lol, its government restrictions and central planning that prevents them from raising rates not competition. Change the law so they can put their rates where they want without government interference and they'll change them tomorrow.
Which is to say that they'll go back to colluding to keep prices high to rake in profits, sure.

quote:
It's funny too the idea that its wrong to "stick the cost to consumers" in a collective payment product. There is no money but what the consumers put in, it has to be bigger than payouts PERIOD.
Yes, and there are _two_ ways to achieve that. One is by soaking consumers without regard for quality of the product, and the other is to improve the quality of the product so that they provide more service for less money. The second actually takes effort to achieve, so they default to the former without regulations that actually force them to offer a quality product (as opposed to the prior situation where they could freely sell useless plans) and prevent them from using arbitrary pricing take as much revenue as they could force people to pay.

quote:
Frankly I find it laughable that you believe this mechanism is somehow not in operation today. The insurance companies have had massive financial incentives to bleed the providers for as long as I can remember.
They've had no motivation to do anything but pass costs along unchallenged, which is why costs in our system are out of control. There has been no real pressure till now to provide better service for a lower cost, because healthcare itself is not a free consumer market. IF you need it, you have to pay whatever the asking price is, so it starts from an exploitative imbalance that requires public regulation to equalize.

quote:
If the argument you are making is that Pyrtolin is ignoring the facts, then that's just another mark in favor of Seriati being absolutely right once more.
Being snide doesn't make you right. It just makes you rude. It does suggest a lack of confidence in your substantive argument, given that there's little other reason to try to patch it over with irrelevant personal attacks.
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Greg Davidson
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quote:
So because you feel that the incorrectness of solicited predictions was not acknowledged, you somehow feel entitled to ignore the substance of claims made?
Yes, after doing a comprehensive analysis of 800 pages of projections made by many of us here, I have established to my satisfaction that some people here spend a significant amount of effort producing falacious assertions and they do not take responsibility for their errors. Seriati, you did acknowledge your errors on the Obamacare thread, and that makes you unique among those strongly on the anti-Obamacare side.

quote:
Are you going to go back and acknowledge every time I've demonstrated where you've overstated your claims?
Please show a single instance of me demonstrably over-stating a claim, and I will correct the record accordingly.
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Greg Davidson
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Oh, and what a surprise - UnitedHealth happenes to be a Corporation that originally lobbied against Obamacare. From 2009:

quote:
[A] source who’s insured by UHG–and who also obtained the letter–called the hotline on Tuesday and says the company directed him to an events list hosted by the right wing America’s Independent Party, and suggested he attend an anti-health care reform tea party sponsored by religious fundamentalist Dave Daubenmire, scheduled for today outside the office of Blue Dog Rep. Zack Space (D-OH).
link
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The Drake
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quote:
Originally posted by Seriati:
Obamacare pays lip service to market competition but there is no actual functioning market mechanism involved.

A fully free market in healthcare cannot function. Maximizing margin means trying to insure the healthy and not the ill. This works okay in automobile insurance, where you will simply be stuck with no or extremely expensive insurance after getting in enough accidents. It also works okay in flood insurance (or at least it works well enough, since bad enough widespread flooding gets covered by the government where it is too risky for insurers). It is governed on the premise that the risky behaviour is the insured's fault - they could drive safer, live somewhere else, etc.

When a six-year old gets leukemia, it is pure random chance, although the profit motive would suggest those premiums should be going up, etc.

This was the reason for the pre-existing condition mandates.

quote:

quote:
Originally posted by the Drake:
UnitedHealth Group doesn't look like it is losing money, although they did mention exchange product pressure that reduces their profit by $0.26, representing about a 4% reduction.

Are you confusing their group returns with their losses on the exchange product?
Hard to know what a company means by "losses" when applied to a product line that is not an independent business unit subject to reporting rules. Just like when government says "cuts" which are actually more than previous, but not by as much as they hoped.

quote:
Prior to the Risk Corridor situation being clarified? Prior to the realization that the subsidies that allow their premiums to be barely unprofitable where not going to be paid, the premiums can't be increased, and not enough new healthy people were going to be added?

Seriously, can't imagine why they would have a change of view.

The timeline says otherwise. October 1st was the date that insurers got the information from CMS. Among positive statements made by UHG after that point include this interview from November 6, and I trust you can find all the others.

Why UnitedHealthcare is expanding offerings on Illinois exchange

I see this as little more than political posturing. We've seen these scares before in healthcare in one form or another, especially Medicare which engages much more aggressively in price-fixing. 91% of care providers take Medicare patients, while a much higher percentage complain that they "might" have to opt out. It is a negotiating tactic.

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