Computer with a mouse clicking on "apply now" to the healthcare insurance marketplace

Forget all the talk of death spirals and devastating losses affixed to UnitedHealth Group’s departure from all but a few of its exchange markets. We’re not there – other dominoes would need to fall first. Should exchange markets see a sudden exodus of Blue Cross Blue Shield plans and established carriers such as Kaiser, then we might talk about death spirals and funeral arrangements for the exchanges.

UnitedHealth alone cannot tear down the exchange markets. With about 500,000 exchanges lives in 2015, the insurer operated in 30-plus exchange markets for 2016. Despite its volume of lives, they were dispersed. UnitedHealth was only an enrollment leader in Nevada, where different factors contributed to its strength.

For a publicly-traded insurer, UnitedHealth picked the wrong moment to play big. In many states, the collapse of CO-OPs came at the worst possible time in the enrollment cycle – after 2016 rates were already set. The return of the CO-OPs’ older, sick populations in the exchange pool would have driven up rates were they not finalized. With policies not reflecting the cost of care these enrollees might incur, lower premiums might draw high-cost enrollees to cheaper policies, making that coverage unsustainable for 2017.

UnitedHealth did not put its best brand forward in many markets. Take Colorado, which UnitedHealth will drop in 2017. UnitedHealth participated in Colorado from the exchange’s inception, albeit through AllSavers Insurance Co., a little-known subsidiary. UnitedHealth barely made a dent in Colorado’s competitive exchange market, where a stronger brand could have made a difference. UnitedHealth can get away with marketing as a subsidiary in Nevada, where its vertically integrated Health Plan of Nevada dominates the commercial market. But AllSavers is not a well-known brand, which likely cost UnitedHealth traction in some exchanges.

UnitedHealth’s exchange withdrawals do not differ greatly from how its top competitors played in the exchanges. Aetna has retreated from several markets since the first open enrollment, many informer Coventry Healthcare strongholds. Not previously a large player in individual policies, Cigna started conservatively in exchange business, with just five states in 2014. It has added new states strategically in subsequent open enrollment periods.

The only exceptions among for-profit, publicly traded insurers are Anthem, which had a large book of individual and small-group business in all of its 14 states.

This is not to dismiss UnitedHealth’s departure as a minor event. In 2015 and 2016, UnitedHealth expanded heavily into states across the southeast and the Great Plains. Those markets typically had few rural exchange offerings, and the dominance of Southeastern state Blue plans is exceedingly difficult to crack. Many counties in those states will slip back to having Blue as the lone option.

UnitedHealth’s decision says more about UnitedHealth’s exchange experience than it does about the state of exchanges. For now, some markets will be diminished, some will feel little impact. With UnitedHealth sticking with a few states, it leaves open the door to expand again – its narrow-network subsidiary, Harken Health, could be an avenue for future exchange participation.

That’s cold comfort in markets where UnitedHealth’s departure winnows exchange options. But UnitedHealth went big at a time when it should have copied its for-profit peers and expanded exchange business more diligently.

wmelville@TeamDRG.com

Twitter: @BillMelvilleDRG

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