Did Aetna just pull a nasty, Trump-like move and up the ante on the Obamacare debate in advance of the election and exchange open enrollment for 2017?
The allegation is that the company withdrew from 11 state insurance exchange marketplaces for 2017 after the Justice Department failed to heed Aetna’s warning that it would do so if Justice didn’t approve its $37 billion purchase of Humana. The Justice Department announced last month that it was challenging that deal and Anthem’s proposed merger with Cigna, saying both deals threaten to sharply reduce competition in the health insurance marketplace.
A July 2016 letter from Aetna to Justice, unearthed by Huffington Post, contains the threat. But in announcing its exchange pullback this past week, Aetna made no mention of the letter and insisted its action was prompted by existing and expected future financial losses in the exchanges.
Even if there was no quid pro quo with respect to the Humana purchase, was Aetna’s move justified by the losses, and forecast of future losses?
You could argue that’s their business and their decision. But in April, according to news reports, Aetna’s CEO, Mark Bertolini, said the company was committed to staying in the exchanges and making them work. Indeed, he told analysts that it would have cost the company around $1 billion to acquire the million or so new customers it had signed up on the Obamacare exchanges.
Moreover, the company booked $200 million in ACA-related pretax losses in the second quarter of 2016—not insignificant but far from an existential threat to the company.
In addition, there’s every indication at this point that state regulators are going to approve fairly substantial premium increases for 2017.
Said Bertolini this week: “As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision.”
News reports implied heavily that what Bertolini and Aetna started to really worry about was the possible $1 billion breakup fee they’ll have to pay Humana if the purchase deal is blocked. And thus, there’s the future implication in Aetna’s move that it is losing faith it will prevail in its merger battle with the government.
Aetna’s withdrawal from the exchanges is just the latest. UnitedHealth said it’ll depart all but a few of exchanges in 2017 and Humana is dropping out of many exchanges, too.
So, here’s question 1: Do these large, powerful, and rich insurers have a social responsibility to hang in the exchanges for at least a few more years to help address what was an awful 40 year social problem (too many uninsured) and market failure that was largely of their making?
Question 2: Are the mergers among four of the largest health insurers a good or bad idea? Is the Justice Dept. right or wrong to try and block them?
Question 3: Is Obamacare imploding, with proposed premiums soaring and stable insurers dropping out? Or is this just an expected period of turmoil in a new and highly competitive marketplace in which consumers have turned out to be very price sensitive (about 40% of returning exchange enrollees switched plans last year and the vast majority went to cheaper coverage) and in which there will be winners and losers? (The co-ops were clearly big losers.)
Question 4: Is the adverse selection issue in the exchanges—too many old, sick people and too few young healthy ones—a potentially long-term problem that’s unlikely to change without major remedy. Or is that a short-term problem likely to correct itself over time, especially as the tax penalties get larger? Could 2017 be the turning point year when young people start to flood into the exchanges, due to the higher tax penalties, marketing, and social forces?
Question 5: What can and should be done to control premium increases in the exchanges? Should benefit designs be more flexible? Do the subsidies need to be increased to make coverage more affordable, or is that caving into insurers and providers failure to control costs?
Let the dialogue begin?
Steven Findlay is an independent journalist and editor who covers medicine and healthcare policy and technology.