Nation's Largest Insurer to Exit California Market in Advance of Obamacare

UnitedHealth Group, the nation’s largest health insurer, is pulling out of California’s individual health insurance market, reports The Los Angeles Times.

The move marks the second major company to leave the state in advance of a major healthcare overhaul under Obamacare.

Around 8,000 existing policyholders will be forced to find new coverage after UnitedHealth leaves the state’s individual market at year-end.

“Our individual business in California has always been relatively small . . . [and] over the years, it has become more difficult to administer these plans in a cost-effective way for our members,” a spokeswoman for UnitedHealth said.

The departure of another major health insurer raises concerns for consumers including less choice, competition, and even more consolidation of the individual market with three big carriers, according to California Insurance Commissioner Dave Jones.

Aetna made a similar move last year affecting close to 50,000 customers.

Starting Jan. 1, the Affordable Care Act, will force insurers to provide coverage to individual applicants regardless of their medical history, including preexisting conditions. The legislation will also require insurers to provide benefits with limits on patients’ out-of-pocket spending.

But experts say many national insurers aren’t interested in providing plans in states where they have little presence in the individual market, especially when a greater profit can be made in the employer market.

“The business model of health insurance is fundamentally changing and some companies are willing and able to adapt,” Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms told the Times.

"Given the limited market share those carriers had, UnitedHealth and Aetna have made the calculation that it required too much of an investment to change their strategy in California."

The move has angered many conservatives, including Rush Limbaugh who claims democrats are running a campaign to sell a bill that is already going to become law, reports Politico. 

“The California health exchange, most people think that’s where you’re going to go to buy our health insurance if your employer doesn’t provide it. Turns out it’s going to be run by the SEIU, the AFL-CIO, Cover California, the NAACP, the Democrat voter registration group, running the California health exchange. You show up to get your health insurance, they’re going to register you as a Democrat; they’re going to get you to the polls to vote on Election Day as a Democrat; they’re using Obamacare and these exchanges to grow the Democratic Party,” Limbaugh said Tuesday morning.

According to regulators, UnitedHealth and Aetna will have to wait five years before reentering California’s individual market, if they chose to do so.