- The latest news coming from the major health payer Aetna is its move to drop out of the majority of the health insurance exchanges it had been participating in this year. According to a press release from Aetna, it will leave most of the public exchange market and downsize from serving 778 counties to only 242 counties in 2017. The only states in which Aetna will continue to provide health plans through the health insurance exchanges include Delaware, Iowa, Nebraska and Virginia.
Aetna will still be offering its private, off-exchange health coverage products in the same regions next year that it had been providing public exchange plans in 2016. Aetna will also be assisting consumers during the next open enrollment periods to transition to an appropriate health plan sold on the exchanges or through its private offerings.
Aetna CEO Mark Bertolini said in a public statement that the company has lost $200 million in its second quarter and has experienced pretax losses of more than $430 million from January 2014 till now. These financial losses have stimulated the health payer with moving out of most of its participation in the health insurance exchanges.
“More than 40 payers of various sizes have similarly chosen to stop selling plans in one or more rating areas in the individual public exchanges over the 2015 and 2016 plan years, collectively exiting hundreds of rating areas in more than 30 states,” Bertolini explained in the release. “Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool.”
“Fifty-five percent of our individual on-exchange membership is new in 2016, and in the second quarter we saw individuals in need of high-cost care represent an even larger share of our on-exchange population. This population dynamic, coupled with the current inadequate risk adjustment mechanism, results in substantial upward pressure on premiums and creates significant sustainability concerns,” Bertolini continued. “We are encouraged by a recent announcement that the U.S. Department of Health and Human Services will explore new options to modify the risk adjustment program, and remain hopeful that we can work with policymakers from both parties on a sustainable public exchange model.”
This news may bring significant concerns to consumers enrolled in Aetna plans through the health insurance exchanges, as more than 11 million people have enrolled in coverage through the exchanges this year. A major stimulus that may have brought forward Aetna dropping out of the public health insurance exchanges may be the Department of Justice’s decision to pursue a lawsuit against the Aetna-Humana health insurance merger.
According to a letter sent in early July by Aetna CEO Mark Bertolini to the Department of Justice, the company has been dedicated to expanding coverage options to all Americans and supporting the federal government in creating the public health insurance exchanges. However, Bertolini states that a legal challenge to its health insurance merger with Humana would make it impossible for Aetna to remain participating in the exchanges since this move would have a negative financial impact on the company.
In order to keep their products affordable for its customers, Aetna may have no choice but to stop operating in the majority of their current public exchange participation. The company has been operating at a loss in the exchanges since 2014 and are challenged to break even in 2016. The ability of Aetna to sustain any more losses was significantly dependent on its acquisition with Humana, Bertolini explains in the letter.
He went on to explain that the population they serve within the exchanges are often sicker and older, which means coverage for these risk pools becomes more expensive than prior to the provisions of the Affordable Care Act. Bertolini mentioned that if the merger is blocked, Aetna will face “significant unrecoverable costs” making it necessary to pull back from the exchanges.
“Our analysis to date makes clear that if the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses,” Bertolini wrote in the letter to the DOJ. “Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint. We currently plan, as part of our strategy following the acquisition, to expand from 15 states in 2016 to 20 states in 2017.”
“However, if we are in the midst of litigation over the Humana transaction, given the risks described above, we will not be able to expand to the five additional states. In addition, we would also withdraw from at least five additional states where generating a market return would take too long for us to justify, given the costs associated with a potential breakup of the transaction. In other words, instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states.”
While Aetna had been initially supportive of participating in the Affordable Care Act’s health insurance exchanges, the move by the Department of Justice to block their merger with Humana has led the payer to pursue pulling out of the public marketplace. For more information about Aetna’s decision to leave the exchanges, HealthPayerIntelligence.com received commentary from Merrill Matthews, the Resident Scholar at the Institute for Policy Innovation.
“Aetna had been one of the few major insurers still expressing general, if tepid, support for the Obamacare exchanges. There was some discussion at to whether it was doing so only as a way to make nice with the Obama administration until its merger with Humana had been approved. But now that the Justice Department is fighting that merger, Aetna has announced that it will pull out of 11 of 15 states where it operates in the exchanges because it lost $430 million,” Matthews told HealthPayerIntelligence.com.
“The significance is that the health insurance ‘death spiral’ that many of us predicted is occurring within the exchanges. We can fully expect to see more of the major insurers limiting their exposure inside the exchanges. Choices will diminish and the provider networks will get even more narrow, which will drive premiums even higher forcing even more people to drop out. The day may come where the exchanges essentially serve as a high risk pool for the very sickest patients,” concluded Matthews.
However, not all experts have positioned the DOJ blocking the health insurance merger as the main reason for Aetna pulling out of the exchanges. Jack Curran, Industry Research Analyst at IBISWorld, feels that, since the Affordable Care Act’s Cost Sharing Reduction program has been eliminated, large payers such as UnitedHealthcare, Aetna, and Humana have been moving their products out of the public health insurance exchanges.
“Aetna is the third major insurance company to announce cutbacks to their public exchange participation; UnitedHealth Group (market share: 21.3 percent) announced a rollback in April, while Humana (market share: 7.1 percent) announced its cutbacks last month,” Curran stated in an email.
“These reductions are likely the result of the elimination of the ACA’s Cost Sharing Reduction (CSR) program, which lowered deductibles, co-payments and co-insurance. Even with this program, Aetna had reported a loss from its insurance exchange coverage,” Curran continued.
“Without the CSR, insurance companies will likely experience further losses. The ACA exchanges are mostly attractive to low-income individuals who qualify for subsidies and people with preexisting conditions; therefore, subsidies are the main funding for the exchanges. Without the CSR, the exchanges will likely become less financially viable for insurers.”
Nonetheless, critics of the Affordable Care Act point at the fact that health payers are facing significant financial losses when operating through the public health insurance exchanges and claim that the provisions of the ACA are unsustainable for insurers around the country.
“Aetna’s withdrawal from nearly a dozen exchanges is another sign that ObamaCare is unsustainable. Premiums are rising as a result of diminished competition and unbalanced risk pools that have led to a higher than expected utilization of health care. Unfortunately, absent from the national policy discussion are the failures of ObamaCare,” FreedomWorks CEO Adam Brandon said in a public statement.
“Earlier this year, Congress showed that there is a path to repeal the worst parts of this law. In order to reach this goal, conservatives must demand that Republicans begin to make ObamaCare an issue in this election and promote patient-centered solutions that will restore the American health care system.”
Despite Aetna’s move outside of the exchanges, there is still optimism that the Affordable Care Act will benefit consumers for years to come. For example, last month, President Barack Obama detailed some of the progresses that have come about due to the Affordable Care Act.
“I am proud of the policy changes in the ACA and the progress that has been made toward a more affordable, high-quality, and accessible health care system,” Obama wrote in The Journal of the American Medical Association. “For most Americans in most places, the Marketplaces are working. The ACA supports competition and has encouraged the entry of hospital-based plans, Medicaid managed care plans, and other plans into new areas. As a result, the majority of the country has benefited from competition in the Marketplaces, with 88 percent of enrollees living in counties with at least three issuers in 2016, which helps keep costs in these areas low.”