Big 5 Exits Will Mean Big Changes For ACA Exchanges

Two of the largest U.S. managed care insurers, Aetna Inc. and UnitedHealth Group Inc., are making big cuts to the number of states in which they will participate in the federally run individual health exchanges.

As Aetna disclosed Aug. 15, the insurer plans to maintain an on-exchange presence in only four states in 2017 — Delaware, Iowa, Nebraska and Virginia — and thereby signaled its exit from the 11 other states in which it participated in 2016.

Individual public exchange participation among the 'Big 5' US managed care insurers

UnitedHealth participated in an even greater amount of states in 2016, at 34, but will now only be staying in three of those states, namely Nevada, New York and Virginia. After taking a relatively measured approach to participation in the early days, UnitedHealth grew quickly, going from 13 individual exchanges in 2014 to 23 in 2015.

Two of the states where UnitedHealth will remain, Nevada and New York, are key markets for the company. Based on year-end 2015 data, UnitedHealth accounted for over half of the health premiums earned in Nevada and around a quarter of those in New York. The Empire State was not particularly profitable for UnitedHealth from an underwriting perspective, however, based on the medical loss ratio in 2015, which stood at 107.9%. This information comes from the Supplemental Health Care Exhibit, Part 1, of annual NAIC statutory statements. The MLRs are calculated gross of recoveries from federal and state governments under an Affordable Care Act reinsurance program and thus directly measures profitability of the insurers' business.

Top 10 states, excluding California, where UnitedHealth had the largest share of the individual health market in 2015A number of insurers have been stung by losses from the exchanges. For instance, Aetna has incurred more than $430 million in pretax losses since January 2014 on individual products, according to remarks made Aug. 15 by Mark Bertolini, the company's chairman and CEO. The struggles of the cooperatives set up in the wake of the Affordable Care Act have also been well-documented, though there may be hope for some, as S&P Global Market Intelligence reported in April.

The big five insurers are far from the only ones fleeing the exchanges. Physicians Health Plan of Northern Indiana Inc., for example, announced Aug. 23 that it will exit the individual marketplace in Indiana and Presbyterian Health Plan Inc. is reportedly exiting the marketplace in New Mexico.

As other publications have noted, this could leave only one insurer offering exchange products in some states. North Carolina and South Carolina are two such states, based on information available from for the 2016 individual plans. The exits of Aetna and UnitedHealth in 2017 would leave only Blue Cross & Blue Shield of North Carolina in the Tar Heel State and Blue Cross & Blue Shield of South Carolina in the Palmetto State.

That assumes, however, that no other insurer expands coverage to those states in 2017. Then again, Wyoming only had one insurer offering exchange products in 2016 — namely Blue Cross Blue Shield of Wyoming.

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