Here’s the problem
For one, with UnitedHealth Group Inc. (NYSE:UNH) not participating, it tells me that even the largest insurer in the nation is still very skeptical as to how things will play out in these insurance exchanges. California offers a moat of possibilities, but it’s simply not worth the price of admission based on UnitedHealth Group Inc. (NYSE:UNH)’s decision. A lack of a large national insurance presence in California’s exchange is only bound to increase the mounting skepticism over how effective these exchanges will ultimately be in manufacturing competition among insurers. Even more so, a lack of recognizable health insurance names could diminish consumer interest in researching these health plans, which would defeat the entire purpose of setting up the health exchanges.
Perhaps the bigger concern here is that a lack of competition from rivals who are big enough to make a difference — no offense given to the remaining nine plan participants — could cause pricing power to clump into the hands of the aforementioned “big four” in California, including WellPoint, Inc. (NYSE:WLP) and Health Net, Inc. (NYSE:HNT). Some would point out that this could be a good thing, which may result in savings due to less competition. Alternatively, these insurers are under no obligation to pass those savings back to plan holders. So while the costs of competition are dropping, those plan premiums won’t necessarily be going any lower.
Onward we march
As I’ve been saying for weeks, there is really only one certainty when it comes to the implementation of the PPACA — and that is that we really don’t know much.
People are certainly going to remain skeptical about how effective Obamacare will be at controlling costs; and California’s inability to draw national insurers to the plate in the individual insurance market is only going to heighten those fears in the interim. However, there are multiple benefits to the bill that can be brought to light that we’ve discussed previously, including the medical loss ratio cap of 80%, which ensures plan members get the care when they need it.
I’m sure there are still plenty of questions yet to arise with regard to Obamacare. The good news is that in a little more than six months we’ll finally have some answers.
The article Did California Just Expose a Major Flaw in Obamacare? originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends, WellPoint. It also owns shares of Citigroup and recommends UnitedHealth Group.
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