{"id":9342,"date":"2016-09-21T01:22:13","date_gmt":"2016-09-21T01:22:13","guid":{"rendered":"https:\/\/www.edrugstore.com\/blog\/?p=9342"},"modified":"2016-09-21T18:55:41","modified_gmt":"2016-09-21T18:55:41","slug":"whats-behind-aetnas-bailing-on-obamacare","status":"publish","type":"post","link":"https:\/\/www.edrugstore.com\/blog\/current-health-news\/whats-behind-aetnas-bailing-on-obamacare\/","title":{"rendered":"What’s Behind Aetna’s Bailing on Obamacare?"},"content":{"rendered":"
\"Obamacare\"
In March 2016, congressional Democrats celebrated the sixth anniversary of the passage of the Affordable Care Act on the steps of the U.S. Capitol.<\/figcaption><\/figure>\n

In mid-August 2016, Aetna delivered a body blow to Obamacare when it announced that it was withdrawing from most of the state exchanges in which health coverage is available to state residents under provisions of the Affordable Care Act. Specifically, Aetna, the nation’s third largest health insurer, announced that in 2017 it would no longer offer health plans in 69 percent of the counties and 11 of the 15 states where it now sells such coverage.<\/p>\n

Aetna is not the first major health insurer to turn its back on Obamacare. Roughly four months earlier, on April 19, 2016, UnitedHealth Group said it would drop out of all but a handful of the 34 state health insurance exchanges on which it sells coverage.<\/p>\n

Aetna Blames Heavy Losses<\/b><\/p>\n

Both insurers said their decisions to exit most Obamacare exchanges could be traced to heavy financial losses they’d experienced in those specific marketplaces. However, Aetna’s announcement followed closely on the heels of federal and state antitrust lawsuits that were filed in July to block Aetna’s acquisition of Humana, as well as Anthem’s proposed takeover of Cigna.<\/p>\n

A number of observers questioned whether Aetna’s abandonment of most Obamacare exchanges could somehow be tied to the government’s opposition to its acquisition of Humana. Mark Bertolini, Aetna’s chief executive officer, was quick to point out that government opposition to the Humana takeover was “a separate conversation” from Aetna’s re-evaluation of its business on the Obamacare exchanges. However, skeptics found it difficult to believe that Aetna’s Obamacare announcement, following so closely on the heels of the government’s antitrust suit, was purely coincidental.<\/p>\n

Aetna’s Letter to Justice Department<\/b><\/p>\n

Belying Bertolini’s assertion that these were two entirely separate matters was a July 5, 2016, letter<\/a> that Aetna’s CEO sent to Ryan Kantor of the Department of Justice. Kantor serves as an assistant chief in the DOJ division responsible for antitrust enforcement in the health care industry. That letter was uncovered by Huffington Post reporters Jonathan Cohn and Jeffrey Young through a request they filed under the Freedom of Information Act.<\/p>\n

\"Obamacare\"
Mark Bertolini is the chairman and chief executive officer of Aetna.<\/figcaption><\/figure>\n

In the letter, written before the Justice Department filed its suit challenging Aetna’s acquisition of Humana, Bertolini said its future participation in the Obamacare exchanges would depend to a large extent on how the government acted with respect to that acquisition. “Specifically, if the DOJ sues to enjoin the transaction,” wrote Bertolini, “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.”<\/p>\n

Must Face ‘Market Realities’<\/b><\/p>\n

According to the Huffington Post, Bertolini’s letter was written in response to an earlier government request asking how, if at all, a government decision on the acquisition would affect Aetna’s decision to continue offering coverage on the Obamacare exchanges. In his reply to the government’s query, Bertolini pointed out that the company had been generally supportive of administration efforts to expand coverage. However, he noted, “we must also face market realities.”<\/p>\n

Bertolini’s letter went on to say that Aetna had been operating on the public exchanges since early 2014 “at a substantial loss.” He predicted that it would still be a challenge for Aetna to recoup its investment in the exchange operations and that expanding into additional exchanges would bring still further losses. “Our ability to withstand these losses is dependent on our achieving anticipated synergies in the Humana acquisition.”<\/p>\n

April 2016 Report Was Upbeat<\/b><\/p>\n

Aetna’s decision to exit multiple Obamacare exchanges also seemed to contradict earlier remarks made by Bertolini to analysts about the insurer’s hopes for its Obamacare business. In an April 2016 presentation to Wall Street analysts, Aetna’s CEO boasted of serving 1.2 million customers on Obamacare health plans, according to a report in The Los Angeles Times<\/a>. Bertolini went on to say that those ACA health plan represented the foundation for a good business line.<\/p>\n

The Aetna CEO told analysts that the insurer’s losses on the Affordable Care Act exchanges were far less than it would have cost to acquire a comparable amount of business through alternative means. “If we were to go out and buy those members, it would cost us somewhere around $1.2 billion to acquire them. If we were to build out 15 markets, it would cost us somewhere between $600 to $700 million to enter those markets and build out the capabilities necessary to grow that membership. So in the broad scheme of things, we are well, well below any of those numbers from the standpoint of losses we’ve incurred in the first two and a half years of this program.”<\/p>\n

Obamacare ‘a Good Investment’<\/b><\/p>\n

In his April report to analysts, Bertolini did say that he hoped the government would show greater flexibility in mandating specifications for Obamacare health plans, but he said that “we see this as a good investment.”<\/p>\n

In his analysis of Aetna’s decision to pull out of most of the state exchanges in which it was active, Los Angeles Times business writer Michael Hiltzik says it’s hard to believe that the insurer’s view of its Obamacare business would change so drastically in so short a period. Hiltzik points out that Aetna has been selling health insurance since the end of the 19th century and has been active on the Obamacare exchanges since they opened for business in 2014. He goes on to say that “if the economics of the exchanges really caught it by surprise between April and August, it should fire its entire financial analysis team. The only thing that really changed in that time frame was the DOJ’s move against the merger.”<\/p>\n

\"Obamacare\"
Aetna, headquartered in Hartford, Connecticut, has been selling health insurance since the end of the 19th century.<\/figcaption><\/figure> Aetna Posts Pennsylvania Profit<\/b><\/p>\n

Pennsylvania is one of the 11 state health plan exchanges that Aetna is leaving at the end of 2016. CNBC reporter Dan Mangan<\/a> questioned Aetna’s rationale for ending Obamacare coverage in the Keystone State in light of the fact that it chalked up a profit there in 2015. According to Aetna’s filing<\/a> with the Pennsylvania Insurance Department, the insurer received $71.4 million in premium income from state residents in calendar 2015. Out of those premium revenues, Aetna paid out $52 million in claims and spent an additional $5.8 million in administrative costs, leaving it with a pre-tax profit of $13.6 million. When Mangan questioned an Aetna spokesman about the insurer’s performance in Pennsylvania for 2016, he was told that Aetna doesn’t “discuss our performance on a state level.”<\/p>\n

If this article piqued your interest and you would like to read more about the future prospects for Obamacare, as well as other developments on the consumer health front, check out our blog<\/a>.<\/p>\n

\"\"<\/p>\n","protected":false},"excerpt":{"rendered":"

In mid-August 2016, Aetna delivered a body blow to Obamacare when it announced that it was withdrawing from most of the state exchanges in which health coverage is available to state residents under provisions of the Affordable Care Act. Specifically, Aetna, the nation’s third largest health insurer, announced that in 2017 it would no longer […]<\/p>\n","protected":false},"author":1,"featured_media":9357,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_autoblog_aioseo_focus_keyphrase":"","_autoblog_aioseo_title":"","_autoblog_aioseo_description":"","footnotes":""},"categories":[18],"tags":[],"class_list":["post-9342","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-health-news"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t