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Aetna latest out of Indiana individual health market

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The nation's third-largest health insurance company is the latest to leave the individual policy market in Indiana in another sign of diminishing competition to  consumers who purchase policies through a state insurance exchange under the federal health care overhaul.

Aetna Inc. informed the Indiana Department of Insurance in an April 29 letter that it intends to cancel all individual policies on Dec. 1. The letter was made public last week in a letter from Deputy Insurance Commissioner Robyn Crosson to the Centers for Medicaid and Medicare Services and posted on the state's federal health care overhaul website, www.in.gov/aca/.

Aetna spokesman Scot Roskelly said Wednesday the carrier currently has only 700 individual health insurance policies in Indiana, making up only a small fraction of the market, and will remain in other sectors, including small group coverage.

"The administrative costs of overseeing just 700 members are relatively high," Roskelly said.

However, Crosson, in her letter, said Aetna was leaving the Indiana individual market over a rule in the federal health care overhaul that insurers essentially must dedicate 80 percent of the premiums they collect to medical care. Anything less than 80 percent would be paid as rebates to policyholders the following year.

Crosson said Aetna and four other insurers — Pekin, American Community Mutual, Cigna, and Guardian Life — cited the 80 percent rule, known formally as the medical loss ratio, as their reasons for leaving the individual market in Indiana over the past year.

Indiana's health insurance market for individuals is dominated by Indianapolis-based Anthem with a 65-percent share, according to Crosson's letter and the state's Medicaid actuary, Milliman Inc. Anthem and four other companies control 90 percent of the market.

However, consumer advocates say the exodus of Aetna and other companies likely will result in fewer choices and higher costs for consumers under health insurance exchanges to be established in 2014 under the federal health care overhaul. The exchanges will pool the resources of large groups of people to offer more affordable health insurance.

About 200,000 Indiana residents now have individual polices rather than employer-provided coverage. About 875,000 have no insurance at all, a number Milliman forecasts to fall by about half by 2019 while the number of individuals with policies swells to between 450,000 and 875,000.

"In Indiana and most other states, the anticipation is that most of the new coverage offered through the exchanges will be through individual policies," said public health insurance advocate David Roos of Covering Kids and Families of Indiana. "Aetna is not a small player."

The Insurance Department's health care director, Logan Harrison, said it's not clear how Aetna's departure from the individual market will affect an Indiana insurance exchange offering individual coverage. He stressed that the state has not decided yet whether it will create an exchange itself or leave it up to the federal government.

The Insurance Department has asked CMS for a waiver that would phase in the 80 percent rule, which took effect Jan. 1, over several years. It has proposed a medical-loss ratio of 65 percent this year, increasing gradually to 80 percent in 2015. It's not clear when CMS will decide whether to grant Indiana a waiver. Other states also have requested waivers.

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  • 20% is not profit
    The "20%" is not profit, as you state. The 20% must cover all the administrative and sales expenses the company incurs. This includes: (a)salaries; (b)IT costs; (c)commissions; (d)real estate expenses; (e) the costs of complying with all the changes mandated by state and federal law; and (f) everything else. Only if something is left after expenses is there a profit for the company's shareholders. Real profits for the health insurers has always been well below many other industries.
  • next up
    Next phrase you'll hear on your preferred econ show will be "insurance companies too big too fail." Just like bail outs increased the size of monster financial institutions, health care reform is forcing insurance companies having marginal success in an area to leave because it isn't worth the added risk to offer/cover additional services with less profit. The big companies stay because they can absorb the risk, add to their market share by swallowing up small companies and with the reduced competition they'll be able to accurately price their product in order to meet the gov't's profit cap.

    This isn't hypothetical, it's already happening as witnessed here, and in other states.
  • another way
    Not saying govm't is the answer, but when you have companies whose ultimate goal is to make more $$ each quarter to satisfy shareholders, and pay their execs multi million bonuses--how much of our health-care $$ are going to this rather than actual health care. Hospitals competing for patients with their non-stop (world-class!) advertising doesn't help either.
  • Insurance
    Jo James:

    You have no idea of what you are talking about. What is your solution, give it to the gov'mint?

    Or just what?
    • Not a big loss!
      I currently have Aetna insurance, and its a joke. They have denied every claim my family and I have made. My wife went to the doctor and they denied she was on my policy, my new born son was denied being on my policy, even though I added him the day he was born. I was denied being on my policy Kind of a weird pattern they have going on there. Take my 390$ a month and turn around and tell you there are gaps in your coverage, when i have worked with out any gaps in my employment, strange! I have notified my hr department and Aetnas customer service with no response. Requesting records from Aetna is'nt gonna happen either, because they tell you records don't exist. Worthless company! My story isnt bad you should hear the horror stories from my co workers! Not sure how Aetnas profit loss in Indiana would really effect them when they wont pay out in the first place.

    • Insurance Companies Destroying the Economy
      A 20% profit for most companies would be a real boon, but not the insurance industry. They take nearly 50% of Medicare payments under an alliance made with the US Congress using an American Medical Association formula. The doctor sometimes gets less for his or her Medicare services than the insurance company under this formula. It's time we cut big insurance out of the healthcare dollar all together. They provide no real service except to cut the amount of care we receive.

      Companies claim they need healthy policy holders to offset the sick ones, but that doesn't account for the massive profits they're now taking. They'd need 20 to 40 times the healthy to make these large profits.

      This action was expected. Notice how the push is now on selling life insurance. These large companies used to cover all insurance types under one general company. They now split into separate companies, including health and life, to take losses in one area and protect huge wealth in another part of the company. The former arrangement allowed sharing the losses and gains. (Like a store that sells more shoes than gloves, except now both departments are independent companies).

      It's time to either tell these companies that they sell all insurance offerings in the state, they operate as one firm and cover their own profits and losses OR, the preferable, we tell them, "NO MORE MONEY FOR YOU!" We're paying the medical provider for services---not a coding company, insurance biller and the insurance company.

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