Leaving California For Health (Insurance) Reasons

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Add insurance companies to the list of businesses that are leaving California, following the tracks of transportation, financial, high tech and manufacturing firms that have crunched the numbers and decided that they can do better elsewhere.

The nation’s largest health insurer, UnitedHealth Group Inc., is leaving California’s individual health insurance market, the second major company to exit in advance of major changes under the Affordable Care Act.

UnitedHealth said it had notified state regulators that it would leave the state’s individual market at year-end and force about 8,000 customers to find new coverage. Last month, Aetna Inc., the nation’s third-largest health insurer, made a similar move affecting about 50,000 existing policyholders.

Though some claim that the exodus of commercial enterprises — manufacturing, at least — from the Golden State is but a myth, California loyalists should be concerned. No less than 158 companies had left the state in just the first 14 weeks of this year.

Joseph Vranich, a business relocation coach, joined Varney & Co. this morning to explain why companies are running for the hills.

“California is losing businesses at a 3:1 ratio and we’re not even through with the year yet,” said Vranich. “It’s high-tech, it’s low-tech, it’s all-tech.”


Are the costs of running a business that high in the state? “Companies like Intel and McAfee, when they locate a new employee outside of the state’s borders, they could do so at a cost of 30% to 40% less than in California,” said Vranich.

Why are they fleeing? The American Enterprise Institute‘s Mark J. Perry diagnosed the problem two years ago:

The state of California is becoming legendary for creating the most anti-business climate in the country because of its high taxes, excessive regulations, forced unionism, and bloated public sector.

But an examination of the state of the health insurance industry in California reveals that not all of the promised land’s anti-business climate is of its own making. in this specific case, the main culprit appears to be Obamacare:

One of the most serious flaws with Obamacare is that its blizzard of regulations and mandates drives up the cost of insurance for people who buy it on their own.

This problem will be especially acute when the law’s main provisions kick in on January 1, 2014, leading many to worry about health insurance “rate shock.”

While some have argued that “California is the White House’s proof that Obamacare is working,” others had predicted the Aetna departure was simply a sign of things to come:

For now, Aetna is just the start. A relatively small start…

In light of the announcement by UnitedHealth Group, that last prophecy was rather quickly fulfilled.

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