Aetna Joins Other Major Insurers In Pulling Back From Obamacare

Aug 16, 2016
Originally published on August 16, 2016 6:37 pm

Insurance giant Aetna will stop selling health insurance through most of the exchanges created by the Affordable Care Act in 2017 because the company said it is losing money in many of those markets.

On Monday, Aetna said it will sell individual insurance policies in only 242 counties in four states, down almost 70 percent from the 778 counties in 15 states where the company markets Obamacare plans this year.

The decision is a blow to President Obama's signature health care law. Most insurers selling plans through the exchanges have been losing money because the people getting insurance under Obamacare have been sicker than forecast.

But Aetna, which lost $430 million on the Obamacare plans in the first half of the year, said it may re-enter the markets in the future.

"We will continue to evaluate our participation in individual public exchanges while gaining additional insight from the counties where we will maintain our presence, and may expand our footprint in the future should there be meaningful exchange-related policy improvements," CEO Mark Bertolini said in a statement.

Aetna, which covers about 900,000 people through the exchanges, is the third major insurer to pull back from the Obamacare marketplaces. UnitedHealth Group said in April it planned to pull out of ACA marketplaces in most states, and just last month Humana, which covers about 800,000 people, said it will cut back its offerings to just a handful of counties.

All the companies said they are losing money on the plans. The Department of Health and Human Services has argued that companies have themselves to blame because they set premiums too low. The companies will be able to adjust the premiums in the future.

"Aetna's decision to alter its Marketplace participation does not change the fundamental fact that the Health Insurance Marketplace will continue to bring quality coverage to millions of Americans next year and every year after that," said Kevin Counihan, CEO of, the federal insurance exchange.

In all, about 11 million people have bought insurance through the exchanges.

A spokesman for HHS said Aetna's decision was an about-face from its earlier statements about the Obamacare exchanges.

In April, Bertolini called the marketplace plans "a good investment" because it would have cost the company far more than $430 million to try to attract that many customers.

"If we were to build out 15 markets, it would cost us somewhere between $600 million to $750 million to enter those markets and build out the capabilities necessary to grow that membership," he said on the company's April earnings conference call with analysts.

Aetna's announcement comes less than a month after the Justice Department sued to stop the company's planned merger with Humana, arguing that the combination would hurt competition. At the same time, the government also sued to block Anthem from purchasing Cigna.

Sen. Elizabeth Warren, a Massachusetts Democrat, suggested Aetna's change of heart was in response to the Justice Department's action. In a post on her Facebook page last week, Warren questioned the company's motives after it first hinted that it was considering cutting its participation in Obamacare.

"The health of the American people should not be used as a bargaining chip to force the government to bend to one giant company's will," she said.

Aetna spokesman T.J. Crawford didn't immediately respond to a request for comment on Warren's statement.

HHS said last week that the per-member health care costs for people covered through the exchanges remained stable from 2014-2015. If that trend continues, insurers should be able to set premiums that better reflect the actual costs of covering people under Obamacare.

"The next ACA open enrollment is key," tweeted Larry Levitt, a senior vice president at the Kaiser Family Foundation. If insurance sign-ups increase, then deeper concerns about Obamacare will fade. "If not, expect a debate about fixes to the law," he wrote.

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It's been a rough few days for President Obama's signature health care law. Now three major health insurers say they will cancel many of the policies they offer through the Obamacare exchanges. The companies say they're losing hundreds of millions of dollars on those policies.

To explain why this is happening and what this might mean for the law and consumers, we're joined by NPR's health policy correspondent Alison Kodjak. And Alison, the news today is that Aetna is pulling out of the exchanges in several states. What reason did it give?

ALISON KODJAK, BYLINE: Basically their answer is they're losing money. They lost $200 million in the last quarter. What they're doing is pulling out of the specific markets that they are having the hardest time making money in, and those are often rural areas, areas with poorer and sicker people or areas with fewer hospitals that's harder to negotiate with.

CORNISH: Why have these insurance companies gone from supporting Obamacare to saying it's too expensive to maintain?

KODJAK: Well, what most of them have said is there are more sick people signing up than healthy people. The law requires that all people get health insurance. So if you don't get it through your employer, you have to buy an individual policy, and you pay a fine. But sometimes those fines are less than the premium for buying a plan, and if you're healthy and you don't think you're going to be very sick, you'd rather pay the fine.

And so what Aetna said and what the other companies, UnitedHealthcare and Humana, have said is that they're not having enough healthy people sign up and pay the premiums and spend less.

CORNISH: So what does this mean for the law? Can this system work if there are states where there, like, are so few offerings - right? - states where insurance companies have pulled out of these exchanges?

KODJAK: Well, that's a real problem. There are few states where a lot of markets are only going to have one company selling insurance, and that's not really good for the marketplace obviously because there's no competition. What the regulators are hoping, what the states are hoping is that another company will come in and fill that void. And that's happened in a few places. Recently Cigna said it was going to move into Illinois.

But the real test is going to be whether these companies can figure out how much to charge for these individual plans so that they don't lose money on every customer but also manage to get the people who are healthy to want to buy insurance. If they charge too much, there are going to be more and more healthy people who say no.

CORNISH: In the meantime, what does this mean for people in the affected states who have to buy insurance through the exchanges?

KODJAK: Well, what you're going to see is the people who have these kinds of policies who - that, you know, an Aetna policy or a Humana policy - that is being cancelled at the end of the year - this doesn't go into effect until January 2017 - they will have to find a different policy through the exchange or perhaps on their own.

If you buy a policy through the exchange and your income is low enough, you can get a federal subsidy. If you buy it on your own outside the exchanges, you can't. So wealthier people might just buy insurance on their own, at which point Aetna is still selling policies, and some of the other companies are. But if you want a subsidy and you need a subsidy, you're going to have to go through the exchanges. Most of them will at least have one policy available.

We did identify one county in Arizona that right now with Aetna pulling out doesn't look like it will have any policies available, and people are debating what's going to happen there, whether a new company will come in, whether they'll change the law somehow. It's really unclear what's going to happen there and especially if that spreads further.

CORNISH: What have we heard from the Obama administration? How have they responded to this?

KODJAK: Well, they're basically just saying the marketplace is new. It needs some time to work out the kinks and adjust so that companies can sell insurance and make money.

CORNISH: That's NPR's health policy correspondent Alison Kodjak. Thanks so much.

KODJAK: Thank you, Audie. Transcript provided by NPR, Copyright NPR.