Friday, May 06, 2016

For United Healthcare, What's the matter with Iowa? -- Part II

Last week, over at, I looked into something of a paradox in United Healthcare's misadventures in the ACA marketplace, from most of which they are withdrawing.

In brief:  in many large markets, UHC offered high-priced plans with comparatively robust provider networks, as you might think befits the nation's largest provider of employer-sponsored health plans. At the same time, UHC is also a major player nationally in Medicaid managed care, which you might think equips the company to offer low-priced plans with narrow networks. And in many smaller and rural markets, they did just that. In Iowa, for example, they were price competitive in most of the state. Yet their market share was low -- about 19% in the counties in which they participated, in almost all of which they have just two competitors. And they are withdrawing from the Iowa marketplace.

Why did UHC not fare better in Iowa? Today I have some new pieces of the puzzle.

My prior piece focused in part on the longtime dominant insurer in Iowa, Wellmark Blue Cross & Blue Shield, which has stayed out of the ACA marketplace to date but is poised to enter it in 2017, as UHC exits. Wellmark has deep customer loyalty, and currently its off-exchange client base is more than double the total enrollment in the ACA marketplace. That doesn't explain UHC's low market share against current marketplace competitors, though. For that, the only potential factor I identified was the company's decision to cut off agent and broker commissions for all its marketplace offerings in 2016.

Today I spoke to Andrew Mahoney, an ACA navigator with Planned Parenthood of the Heartland who worked in rural counties in the southern part of the state. The nearest city to his territory is Omaha, over the state line in Nebraska. And in this rural country, at least, UHC's problem was the inverse of what it appears to have been in large markets like Chicago, Atlanta and Seattle.

UHC's problem in southern Iowa, according to Mahoney, was that "the only products they offered was HMO plans. They didn't offer any plans that were PPO or POS. So people in border counties, if they need a specialist out of state, weren't covered.* People hate that."

In contrast, Aetna's Coventry fielded point-of-service plans, which offered enrollees "at least some out-of-network coverage, if they decided to go to Omaha." And Medica offered a PPO, "which would cover anywhere they went."

United Healthcare did not have a consistent price advantage, though it did offer the cheapest silver plans in some parts of Mahoney's territory.  But "most of the time Coventry was the cheapest silver option" -- and the mid-range option among the three choices in terms of network flexibility.

Some choice in providers was vital to prospective enrollees in much of the state, Mahoney suggested. "Our whole state is bordered with doctors around us that are outside the state." Clients "need to be able to see what's in or out of network.  United Healthcare being an HMO, there was no coverage outside the state."

What about metropolitan Des Moines, by far Iowa's largest urban area? In Des Moines itself, UHC sells cheapest and second-cheapest silver and considerably undersells Coventry, its nearest competitor. There too, however, UHC offers an HMO versus a POS for Coventry and PPO Medica.

According to Mahoney, "In central Iowa the story was very much the same. Coventry provided more options at the same cost as UHC or very similar costs. Being an HMO was not as big of a factor in central Iowa, but was still a factor for some."

I don't want to overgeneralize on too little information here. UHC may have hit the sweet spot in some ACA markets in which participated, and it may be pulling out of some markets in which it was profitable. But its declared losses and withdrawal from most of the marketplace do seem to bespeak a pretty wide range of miscalculation. And Iowa appears to be a part of that picture.


* Update: Balloon Juice health insurance blogger Richard Mayhew points out that there's nothing inherent in HMOs rules or procedure to prevent them from including out-of-state providers. But UHC appears not to have done so in southern Iowa -- or at least to have had scanty enough options to deter enrollees who checked the rosters on


  1. Let me keep at this.

    The United problem that interests me is NOT the persons they did not attract due to narrow networks.

    What interests me is how they lost so much money on persons who did sign up with them?

    1. Bob, the Richard Mayhew hypothesis is that in large markets, UHC was a victim of adverse selection, courtesy of high prices and more robust networks -- healthy shoppers went to the cut-rate competitors. Perhaps their sales in small and rural markets, where they were generally price competitive, simply weren't enough to offset that. I don't know whether their failure to gain proportionate market share in Iowa is representative,or what their small-market vs. large-market customer mix is, but in the Urban Institute study, the large markets in which UHC participated accounted for 47% of the country's population, and UHC also participated in half of small/rural markets accounting for 37% of population (so, maybe about 20% for UHC). I suppose a good study might compare UHC's MLR in states with mostly small markets vs. states with mostly large ones.

    2. This also shows what happens when you have timid or non-existent risk adjustment systems.
      In the more mature European insurance markets. a carrier that attracts sicker participants is given extra funds from the risk adjustment pool. This has the effect of smoothing financial results and this creates carrier stability.
      Without this type of infrastructure, the effect of guaranteed issue will always be instability and carrier departure. It only happened about ten straight times in the states that tried guaranteed issue in the 20 years that preceded the ACA.