Health Insurance

UnitedHealthcare Expanding Obamacare Coverage in 2015

In public filings with health insurance regulators in a number of states, UnitedHealthcare part of UnitedHealth Group (NYSE:UNH) has shown an increased interest in participating in the Obamacare exchanges for 2015. In 2014, the insurer only participated in a few state marketplaces including: MarylandNew York, and Colorado. The largest health carrier in the United States, UnitedHealthcare had one of the more limited footprints when it came to offerings on the subsidy eligible exchanges. In 2015 however, the company is apparently planning greater participation when it comes to the exchanges.

Jumping in After Avoiding Uncertainty in 2014

Six months after the end of the first enrollment period, carriers are getting a better sense of the costs they can expect to incur with Obamacare enrollees. With much publicized concerns regarding the first wave of exchange enrollees, many carriers were cautious when it came to their exchange offerings and coverage. Many were very selective about the markets they chose to participate in with United Healthcare being among them. In the New York market the healthcare provider had one of the highest average premiums.

Some of the carriers concerns about cost certainty look to have been justified, as the filings in a number of states indicate that the lower priced insurers are raising rates going into 2015 to more properly align the plan premiums with the costs of policyholders. With 6 months of data and better indications for where competitor pricing, UnitedHealthcarelooks to taking a more aggressive approach this time around. In our examination of rate filings in 7 states, UnitedHealthcare has filed for approval to sell exchange plans in 3 new states: Rhode Island, Connecticut and Washington. There are also indications that the insurer will be participating in half of all states this year

The long term financial benefits of participating on the individual health insurance market are pretty clear, so it's not surprise that the carrier is taking a more active stance when it comes to these plans. While the carrier will have greater representation among the exchanges, we think that the impact in actual enrollment may be slower than expected. Our initial calculations indicate that the plan offerings from UnitedHealthcare will be priced towards the middle of the pack in the new states we've looked at. Based on our survey of 2014 data, most of the newly insured were extremely price conscious, with the cheapest insurers capturing a greater share of enrollment. 

With average rates, UnitedHealthcare should expect some of the marketshare on the exchanges especially for anyone previously insured that may be familiar with the brand and its networks. For the uninsured who may be looking to enroll for the first time however, we expect only a small percentage will pay higher premiums for coverage. 

All About The Long Term

While the individual market revenues will still be only a tiny part of the company's business (easily dwarfed by the small group and company health insurance businesses), participation in this area is all about the long term. An active approach to the exchanges is a positive signal that the company has a long term strategy for the indivdual marketplace. With health insurance enrollment being a very sticky and having low turnover year to year among policyholders, there are tangible long term benefits to acquiring even a small piece of the market. As individual health insurance becomes a bigger part of health coverage in the United States, this aggressive stance should pay dividends in the long run. 

Jonathan Wu

Jonathan is the CEO and Co-Founder of ValuePenguin. He reports on an array of topics, including the financial services industry, healthcare reform, and financial products for consumers. He previously worked in the financial services industry, including at such hedge funds as Avenue Capital Group.