Aetna’s Obamacare reversal latest blow to U.S. health law

August 2, 2016

Health care insurance giant Aetna Inc., facing more than $300 million in losses from Affordable Care Act health plans this year, may exit Obamacare markets in some states as challenges to the health-care overhaul pile up.

While the health insurer has yet to leave any states in which it now sells Obamacare programs, CEO Mark Bertolini said Aetna is evaluating its participation by market and will start making decisions in coming weeks. The company, which covers 838,000 people through Obamacare, is halting a planned expansion of those offerings in new states for next year.

“We’ve got to be able to cover the costs associated with providing the care,” Bertolini said.

Big insurers’ flight from Obamacare’s marketplaces, beginning with industry leader UnitedHealth Group Inc. earlier this year, will leave more consumers with fewer coverage options in 2017. The health law relies on privately run insurers to offer health plans that consumers can purchase, often with government subsidies. Last week, Humana Inc. announced a broad retreat from selling ACA plans, and Indianapolis-based Anthem Inc. said it would lose money from participation in the program.

Unexpected move

Aetna’s move Tuesday was somewhat unexpected, as the insurer had submitted plans to regulators to enter five new states next year, and told investors in April that it was on track to break even this year on plans sold under the ACA. The announcement came Tuesday in a statement as the insurer reported second-quarter results that topped analysts’ estimates. Lower expenses, and strength in Aetna’s other business lines, helped the company cushion losses from ACA plans.

The stock rose 1.3 percent, to $115.78 each, in afternoon trading. Aetna had gained 5.9 percent this year through the close of U.S. markets Monday, the second-best performance of the major health insurers after UnitedHealth.

President Barack Obama has said there’s a need for more competition in some markets. In an article in the Journal of the American Medical Association, he said Congress should consider allowing a government-run health plan to compete with private carriers on the ACA exchanges in areas where individuals have few options.

‘Full confidence’

Still, Marjorie Connolly, a spokeswoman for the Department of Health & Human Services, said consumers will have “a robust set of choices,” when they pick ACA plans for next year. The sign-up period for 2017 coverage begins on Nov. 1.

“We have full confidence, backed by data, that the Health Insurance Marketplace will continue to thrive for years ahead as a place where insurers compete for business and consumers have access to a range of affordable coverage options,” she said Tuesday in an e-mail.

Bertolini said the ACA re-evaluation wasn’t prompted by a Justice Department decision last month to sue to block his company’s planned $34 billion acquisition of Humana. Anthem said last week that if its merger with Cigna were approved, the company’s participation in Obamacare exchanges would expand.

Aetna and Humana said Tuesday that they agreed provisionally to divest Medicare Advantage plans that cover 290,000 people in 21 states, in an effort to gain approval for their deal. Molina Healthcare Inc. will pay about $117 million in cash for the assets, and the transactions are subject to the successful completion of Aetna’s acquisition of Humana, as well as other regulatory approvals.

Fixes needed

Bertolini said big changes are needed to make the exchanges viable. Risk adjustment, a mechanism that transfers funds from insurers with healthier clients to those with sick ones, “doesn’t work,” he said. Rather than transferring money among insurers, the law should be changed to subsidize insurers with government funds, Bertolini said.

“It needs to be a non-zero sum pool in order to fix it,” Bertolini said. Right now, insurers “that are less worse off pay for those that are worse worse off.”

HHS has proposed changes to the risk-adjustment mechanism to make it more accurate. Those include accounting for prescription drug claims and the extra costs of people who sign up for ACA plans for only part of the year.

The fate of the market may ultimately rest on the November election. Congressional action is needed to stabilize the ACA marketplaces, according to Dan Mendelson, who runs the Washington-based consulting firm Avalere Health.

“The ACA market is a difficult market, and it is in need of political stabilization,” he said. “If the Congress does not roll up their sleeves and figure out how to improve this marketplace, it’s going to be difficult to figure out how it’ll continue in the future.”


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