Insurance Commissioner Worried About United’s Departure From Individual Market

The California Insurance Commissioner yesterday expressed serious concern about the withdrawal from the individual health insurance market in California by the nation’s largest insurer, United Healthcare.

The move this week by United follows on the heels of last month’s pullout from the individual market by Aetna.

The withdrawal by the two insurers from the individual market could cause some trouble for California consumers, Insurance Commissioner Dave Jones (D) said.

“I don’t think this is a good result for consumers,” Jones said yesterday. “It means less choice, less competition and even more consolidation of the individual market.”

United has a limited presence in the state’s individual market, according to Jones, with about 8,000 people currently insured in its subsidiary PacifiCare. And, he said, Aetna also casts a relatively small shadow in the individual market, with approximately 50,000 people insured in the state.

Dave Jones mentioned a little-known detail about a tax break for other insurers that might have placed United and Aetna at a competitive disadvantage.

According to Jones, a $100 million tax break enjoyed by two other insurers, Anthem and Blue Shield, gives them a competitive break and led to the withdrawal from the individual market by United and Aetna.

“Competition is always better for consumers,” said Nancy Kincaid, press secretary for the Department of Insurance. She said Anthem and Blue Cross, as PPOs, can file with the Department of Managed Health Care, which regulates HMOs, rather than with the Department of Insurance, which regulates the individual and small group markets.

“You’re looking at $100 million a year in combined tax [breaks for Anthem and Blue Cross],” Kincaid said. “That puts the other [insurers] at a competitive disadvantage.”

And, she said, “That’s $100 million in taxes that won’t be coming to the state.”

Much of the individual and small group market policies are likely to be absorbed by Covered California, the state’s health benefit exchange, when it starts in 2014.

In May, United Health and Aetna both opted out of participation in Covered California, along with another large health insurer, Cigna.

That means the three largest remaining health insurers in California — Kaiser, Anthem and Blue Shield — could consolidate the market to the eventual detriment of consumers, Jones said.

“That means even higher prices from those health insurers downstream,” Jones said.

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