UnitedHealthCare, the largest insurer in the country, is starting to make good on its threat to ditch the Patient Protection and Affordable Care Act marketplace.

After losing $475 million on its Obamacare business last year, the company will be scrapping most of the insurance plans it offers through the state and federal marketplace in 2017, it announced this week. Its plans will remain available in only a “handful” of states.

Few argue that UnitedHealth’s exit from the marketplace means the marketplace is doomed. Many worry, however, that others will follow suit. Blue Cross Blue Shield, Aetna and others have suggested that the current pool of people covered by PPACA policies are unprofitable, due to high claims.

The Obama administration has continued to urge patience from insurers, arguing that growing enrollment in the PPACA marketplace will eventually ease the pain that insurers have weathered in the first two years since the landmark health law was implemented.

Furthermore, the administration has put in place new rules aimed at reducing the number of people who sign up for PPACA policies past the open enrollment deadline. Insurers have claimed that those who take advantage of the “special enrollment” provisions tend to cost more, perhaps because some of them are waiting until they need health care services to sign up for plans.

It’s very likely, however, that insurers will cope with their current struggles by raising premiums. Faced with proposed rate hikes by insurers, the Obama administration will find itself torn between competing political considerations. It wants to keep premiums low to make the marketplace as popular as possible, but it can’t afford to have insurers ditch the marketplace entirely.

If insurers raise premiums substantially, that does not necessarily mean that policyholders will be paying much more for their plans. Since 85 percent of marketplace enrollees receive some level of subsidy to buy their plan, higher premiums might be paid largely by the feds.

"(I)t's clear that this is a growing business for insurers, and it's a product consumers want and need,” Ben Wakana, a spokesman for the Department of Health and Human Services, told CNN Money.

Instant Insights /

UnitedHealth begins its departure from PPACA exchange

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