UnitedHealthcare, the largest insurance company in the U.S., struck perhaps its largest symbolic blow yet to the Patient Protection and Affordable Care Act (PPACA). It has announced it will withdraw from California’s insurance exchange.

The company has already said it plans to stop offering plans on a number of state exchanges starting next year, but its abandonment of Obamacare business in the nation’s largest state is by far its largest surrender.

UnitedHealth is now planning to only participate in six state exchanges next year. Exchanges in three states — New York, Nevada, and Virginia — will offer UnitedHealth plans, while HarkenHealth, a UnitedHealth subsidiary, will offer plans “on a limited basis” in Florida, Georgia, and Illinois exchanges.

The individual and small group health plans UnitedHealth sold on the PPACA exchanges only ever amounted to a sliver of the mega-insurer’s multi-billion dollar business, but the for-profit company decided it could not continue to justify the losses it was incurring on the plans to its shareholders.

Perhaps less significant than the initial losses was the uncertainty over whether future profits would ever materialize. In a statement justifying the decision, the company referred to the higher-than-average risk profile of exchange enrollees.

Furthermore, contrary to some expectations, the PPACA didn’t upend the employer-sponsored insurance market that UnitedHealth and other major insurers already dominate. With the apparent assurance that they would not cut into the conventional market, UnitedHealth no longer feels a need to establish or retain a foothold in the individual exchange market.

No other insurers have yet taken as dramatic a step away from PPACA business as UnitedHealth, but most have voiced doubts about their long-term commitment to the exchanges. Humana has withdrawn from some state exchanges.

But according to the Wall Street Journal, Anthem plans to stay in the 14 states where it currently offers PPACA plans, Aetna will remain in the 15 states it operates, and Cigna, which is currently operating in seven states, plans to expand into more.

Instant Insights /

UnitedHealth to pull out of California PPACA market

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