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A big insurer is quitting Obamacare. Here's why that doesn't spell doom.

UnitedHealth isn't a canary in the coal mine.

Supreme Court Rules In Favor Of Obamacare In Landmark Healthcare Case Photo by Mark Wilson/Getty Images

Obamacare has suffered in headlines lately.

The country's largest insurer, UnitedHealth, is pulling out of the marketplace after losing $1 million on lower-than-expected enrollment. Another big health plan says the people that do sign up are too sick and expensive. All the while, Obamacare's marketplace is enrolling millions fewer customers than initially expected.

None of this great news for a health care law that Obama once said would make shopping for insurance as easy as buying "a plane ticket on Kayak or a TV on Amazon."

It's true that some of those insurers placed bets on the marketplace — and lost.

But this doesn't suggest that all insurers are doomed to lose, nor does it spell the demise of the marketplace. Quite the opposite, some are feeling quite bullish on the opportunity. They say the marketplaces have been good for their bottom lines — or expect it to get better in the near future.

The dividing line between the marketplace's winners and losers seems to be this: The winners started with a background and experience in how low-income Americans shop for coverage. Those losers didn't have this skill set — and its shaping up to become a really important factor in what the Obamacare marketplaces look like going forward.

Insurers that are unfamiliar with the people who buy on marketplaces have had a bad experience. Some are quitting.

piggy bank

On the surface, it looks like there are two types of insurance plans that have struggled and will no longer participate in the Obamacare marketplaces.

The first type are insurance behemoths like UnitedHealth, a well-known carrier that has sold in dozens of Obamacare markets over the past two years. UnitedHealth has lost millions in the marketplaces and announced earlier this month that it would stop selling in most states.

The second type are small insurers that you probably haven't heard of, many of whom launched in tandem with the health law. These health plans saw the new marketplace as an opportunity to break into the health insurance industry. This includes many of the health law's co-op plans (a dozen of those have folded) as well as startup businesses like Oscar (the new insurer lost $105 million in 2015).

There are lots of differences between these insurers — starting with their size — but they do have one important thing in common. Neither had much experience (or any experience) selling individual policies to the type of people the marketplace was meant to serve.

This is especially obviously for the startup insurers who were new entrants to the insurance business. But it was also pretty true for UnitedHealth. The carrier has traditionally focused on the employer market, where companies buy coverage for hundreds or thousands of workers.

The people who get insurance in that market — and the way they get insurance — is pretty different from the marketplace. For starters, they tend to be higher-income (companies with better paid workers are more likely to offer insurance). They also rarely shop for insurance in the way they might shop for cars or groceries. Instead, they leave the human resources department to take care of that work — and pick between a handful of pre-selected plans.

The plans UnitedHealth sold on the marketplaces seem to reflect this type of experience: They tend to be more expensive with larger provider networks. Turns out, that wasn't what marketplace shoppers wanted.

The marketplace has winners. You just don't hear as much about them.

Open Enrollment Begins For Third Year Of Affordable Care Act Photo by Joe Raedle/Getty Images

Insurers quitting Obamacare certainly make more headlines than those joining the market. So it was easy to miss Tuesday's news about an insurance plan that has steadily expanded its presence in the marketplaces — and has been pleased with its results.

St. Louis-based health plan Centene told investors Tuesday that it was "achieving margins at the higher end of our targeted range" on marketplace plans. It sells coverage to just over a half-million members in 15 states.

Centene has a much different background than UnitedHealth; before Obamacare, the health plan worked with states to help manage their Medicaid programs. Their core competency is in providing health coverage to low-income Americans.

And that's a lot of what the marketplace is. Government reports show that 80 percent of Healthcare.gov enrollees earn less than 250 percent of the poverty line (about $60 for a family of four). Centene came into Obamacare knowing how to target those people, as St. Louis Post-Dispatch reporter Samantha Liss detailed in a recent piece:

Instead of offering a broad range of plans, the company is narrowly focusing on low-income individuals who have lost their Medicaid eligibility and need to find a private health insurance plan.

By selling insurance to consumers the company already knows, Centene plays to its strength.

Another insurer playing to its strength is Anthem, which sells Blue Cross Blue Shield plans in 15 states. BCBS was a plan that did lots of individual market sales before Obamacare, and its chief executive, Joe Swedish, says it plans to stick with that in the marketplaces.

"We're really pleased overall in how our team has been able to navigate a changing landscape over the last view years," he told investors on a call earlier this week. "We do believe we're well positioned for continued growth in the public exchanges."

What 2017 looks like for the Obamacare marketplaces

What's next for the Obamacare marketplaces? I've spent a good deal of the last week talking to experts about this question, and think it boils down to three main points.

First: no mass exodus of carriers is expected; UnitedHealth isn't viewed as a canary in the coal mine. It is among a group of insurers that will scale back their Obamacare bets in 2017, but does not prognosticate doom for the marketplaces.

We don't even know, quite yet, how United's pull-out will effect competition. A good state to look at on this point is Iowa — United is exiting that state, but a new carrier, Wellmark, will enter after three years of sitting on the sidelines.

"I don't see this becoming a trend," says Cynthia Cox, Kaiser Family Foundation's associate director for the Program for the Study of Health Reform and Private Insurance. "Cigna and Anthem will likely become more significant players. They've already confirmed they plan to continue to participate, and Cigna has additionally indicated they may expand into new areas."

It is certainly possible that, in a few years, Cigna and Anthem may revisit their positions and change course. Right now, however, is not that moment.

Premiums will increase in 2017, likely more than they have in previous years. Health plans have clearly warned that premiums will increase more in 2017. This reflects the fact that insurers generally priced too low in the marketplace's early years — they were too optimistic about how healthy their enrollees would be. Now, they have data on patients' health costs and can use that to set premiums appropriately.

One important thing to note here is that the vast majority of marketplace enrollees are shielded from these changes; the law caps their contribution to premiums at a certain percent of income. The government — which has to subsidize their health plans — would bear the brunt of these increases.

The marketplaces will continue to be a smaller-than-expected source of coverage for Americans. There are millions fewer people using them than Washington's health care wonks initially expected. In 2015, the Congressional Budget Office estimated that 21 million people would rely on the marketplaces for coverage in 2016.

Last month, they revised that figure down to 13 million, and current enrollment hovers around 10 million.

This could be problematic if Obamacare was falling short of its coverage goals. But right now, that doesn't seem to be happening thanks to higher-than-expected participation in other programs, like Medicaid.

The real worry here is that low enrollment indicates that healthy people are skipping the marketplace, leaving insurers with only the most expensive, sickest patients to cover. There are some initial reports that show marketplace enrollees do have higher health care costs (a particularly scathing one was issued by Blue Cross Blue Shield in early April).

It's possible those high costs reflect pent-up demand for health care from those who have gone years without coverage. Or, it's possible that the marketplace will continue to attract sicker enrollees. It will take a few more years to know which one of these scenarios is playing out right now.

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