- The national health payer Aetna may have chosen to reduce its participation in the Affordable Care Act’s health insurance exchanges due to the Department of Justice’s decision to pursue a lawsuit against the merger between Aetna and Humana. Controversy surrounds Aetna’s decision to pull out of the health insurance exchanges with many believing that Aetna CEO Mark Bertolini saw it as a way to pressure the DOJ to end their lawsuit.
The biggest issue with Aetna dropping out of a number of health insurance exchanges is the fact that it would decrease competition and strip healthcare coverage away from low-income consumers. These consumers may be left with only one or two other options for their health plans, research shows.
The solutions that could address the problems of low-income Americans losing their healthcare coverage options on the health insurance exchanges may be certain reforms that would better incentivize payers to remain in the public marketplace. Additionally, the health payer Aetna could move toward investing more of its resources in the ACA health insurance marketplace instead of pulling back so that more consumers are assured of keeping their coverage options.
According to a letter from five United States Senators, the decision of Aetna to pull out of a number of the health insurance exchanges came soon after the Department of Justice filed a lawsuit against its proposed $37 billion merger with Humana. An important point brought out within the letter is the fact that Aetna is required under contract to pay Humana a $1 billion fee if the acquisition is not completed by December 31, 2016.
These type of fees are common in the midst of a major health insurance merger so that the payer is covered in the case of regulatory blockage of an acquisition. However, now that the outcome of the merger is in doubt, Aetna may see this fee as an “expensive and risky bet,” the letter stated.
Before the Department of Justice announced their plan to block the health insurance merger, Aetna had been planning to invest further in the exchanges and spoke about expanding its participation in 2017. In April and May 2016, Aetna representatives had spoken of their commitment to the public marketplace and their hope to further expand.
However, when the Department of Justice began investigating the merger more closely, Aetna CEO Mark Bertolini sent a letter to the DOJ explaining that a legal challenge to its merger with Humana would make it difficult for the payer to continue selling plans on the health insurance 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.”
David Balto, counsel for the Coalition to Protect Patient Choice, told HealthPayerIntelligence.com that the lawsuit against Aetna’s health insurance merger should not have affected its ability to participate in the health insurance exchanges.
“Aetna is a very large health insurer with substantial resources that it can draw on. It doesn’t need Humana to compete in insurance markets, and DOJ's decision to block the merger likely doesn't impact its ability to participate in the health care exchanges,” Balto explained. “As others have reported, this claim was likely an attempt by Aetna to establish a quid pro quo with DOJ; let the merger with Humana proceed, and we will maintain and expand our presence on the exchanges.”
“DOJ rightly rejected this underhanded attempt to make a deal. The court will do the same. The courts have always held that an anticompetitive merger cannot be justified if there is some other goal that could be met,” Balto continued. “Every economic study has demonstrated that mergers raise premiums. That history will be dispositive to the court. They claim the merger with Humana will benefit consumers, but they have provided no evidence of this. DOJ said they have seen no evidence that the merger will benefit ordinary Americans; we haven't either. When asked for hard facts on these supposed benefits, the companies have responded with evasions and vague platitudes. The judge is unlikely to find that convincing.”
There may be some challenges that Aetna has faced in continuing their expansion on the health insurance exchanges when its planned merger with Humana was blocked. In general, some payers have faced difficulty with remaining profitable on the exchanges, with Aetna stating it has seen pretax losses of more than $430 million since January 2014.
The solution to the decline in the number of health plans offering coverage through the exchanges may revolve around needed reforms to the Affordable Care Act. New incentives may need to be made to keep payers from losing profit when selling plans on the public marketplace.