EDITORIAL: Insurer’s decision to leave exchanges should come as no surprise

April 22--THE CEO of UnitedHealth Group wasn't kidding in November when he said he couldn't guarantee his company would be a long-term resident on the federal health exchanges. "We can't sustain these losses," Stephen J. Hemsley said at the time. "We can't subsidize a market that doesn't appear at this point to be sustaining itself."

Five months later, nothing has changed, and so

UnitedHealth Group -- the largest U.S. health insurer -- is bidding farewell to Obamacare. Hemsley announced Tuesday that his company will leave most of the 34 exchanges where it's participating. This includes Oklahoma, a move that will affect about 5,000 residents who bought UnitedHealth Group plans offered on healthcare.gov.

It's the latest sign that the Affordable Care Act, which birthed the exchanges, is on rickety stilts and deserves a higher profile in the presidential campaign, particularly among the Republican candidates.

The decision by UnitedHealth Group makes perfect business sense. In its first-quarter earnings report this week, the company said it expected to lose $650 million on the exchanges this year -- up considerably from its earlier projection of $525 million. In 2015, it lost $475 million, which is what prompted Hemsley's late-year warning.

The Wall Street Journal noted that if UnitedHealth were to pull out of all markets, "the number of U.S. counties served by three or more Obamacare insurers will fall to 48 percent from 64 percent today, while the counties with a single insurer will rise to 24 percent from 7 percent."

Oklahoma figures to be in that latter category. The state originally had four insurers offering plans via healthcare.gov when the exchange opened in 2014; once UnitedHealth bails, only Blue Cross and Blue Shield will remain.

The problem with Obamacare from the start was its lack of sustainability. That requires broad participation, especially by younger, healthier people who pay into the system but don't need its benefits very often. In theory, they would help pay the freight for older, sicker enrollees. But younger people have avoided signing up, preferring to pay the penalty for not doing so.

The system now has not enough participants, too many expensive claims, too-high (and rising) premiums and too much risk for insurers. It also has participants who sign up when they need expensive treatments, then drop out later.

Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute who has written extensively about Obamacare, noted in an essay at Economics21.org that those signing up under the Affordable Care Act "are disproportionately sicker than average and have chronic health conditions that make them more expensive to insure."

Meantime, she wrote, insurance companies thought they'd be getting payments from the federal government to ease their losses. But two oversight agencies have said a congressional appropriation is needed before such payments can be made for these "risk corridor" payments.

"If Congress holds its ground during the appropriations process and refuses to bail out the insurance companies for fiscal 2017, it is likely that more of them will withdraw from the exchanges, raising prices for existing customers," Furchtgott-Roth said. UnitedHealth, she wrote, should be viewed as "the canary in the coal mine, and expect more withdrawal announcements in the future."

Given Obamacare's track record, there's no reason to think her prediction won't indeed come to pass.

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