The battle between health insurance giants and the federal government is intensifying. As some insurers, including Aetna and Humana, are fleeing the Affordable Care Act exchanges, the federal government said Thursday that it’s not surprising some companies are struggling now that they have to compete on cost and quality “rather than by denying coverage to people with pre-existing conditions.”
The barb came on the heels of The Huffington Post reporting that Aetna’s chief executive, Mark Bertolini, in a letter to the Department of Justice, “threatened” to pull back on the health care exchanges if the government tried to block Aetna’s merger with Humana. However, Aetna told Insider Louisville that Bertolini sent the letter merely to fulfill a DOJ demand for information.
Aetna, based in Hartford, Conn., wants to buy Louisville-based rival Humana for $37 billion. The companies have said that the merger would allow them to provide better health care at a lower cost to more people. However, the Justice Department said the merger would reduce competition and harm consumers, and in July filed a lawsuit to block the deal. Humana employs about 12,500 in Louisville.
This week, Bertolini said that Aetna next year will offer health insurance plans for individuals on the exchanges in 242 counties — down 536 counties, or nearly 69 percent, from this year.
Bertolini said the company, regrettably, had to reduce its participation on the exchanges because the share of high-cost patients Aetna is gaining through the exchanges is rising.
Aetna said this month that it recorded a $200 million loss in the second quarter related to patients it gained through the health exchanges that are a central part of the Affordable Care Act, aka “Obamacare.”
Insurers including Humana have said that the patients who have signed up through the exchanges have been sicker than expected and that their health insurance premiums have not been enough to cover the patients’ medical costs.
Bertolini’s comments this week marked a shift from his previous take on the health care law: As recently as May, Bertolini had said that he views Obamacare as a good opportunity for Aetna and that the losses the company had incurred paled in comparison to the $2 billion Aetna would have had to spend to acquire those customers without the health care law.
When Bertolini’s letter surfaced this week, it fueled speculation that Aetna was reducing its participation in the exchanges in retaliation to the DOJ’s lawsuit.
In the letter, the CEO wrote that if the Justice Department challenged and/or successfully blocked the merger, it “would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support, leaving Aetna with no choice but to take actions to steward its financial health.”
Bertolini said that Aetna’s ability to withstand losses it incurs from ACA patients “is dependent on our achieving anticipated synergies in the Humana acquisition.”
“Our analysis to date makes clear,” he continued, “that if the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses. Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint.”
Bertolini wrote that instead of expanding to 20 states next year, Aetna would limit its ACA participation to no more than 10 states.
“Finally, based on our analysis to date, we believe it is very likely that we would need to leave the public exchange business entirely and plan for additional business efficiencies should our deal ultimately be blocked,” Bertolini wrote.
While some media outlets described the letter as threatening, Aetna told IL that Bertolini was responding to a civil investigative demand the DOJ issued on June 30. Aetna provided IL with a copy of the CID, which includes the demand for an explanation of how the suit would affect “Aetna’s business strategy and operations, including Aetna’s participation on the public exchanges related to the Affordable Care Act.”
Aetna told IL via email that the ACA-related losses in the second quarter — “and not the DOJ challenge to our Humana transaction, is ultimately what drove us to announce the narrowing of our public exchange presence for … 2017.”
Meanwhile, the U.S. Department of Health and Human Services told IL via email Thursday that despite Aetna’s pullback, the health exchanges will continue to provide quality coverage to millions of Americans.
“The ACA Marketplace is serving more than 11 million people and has helped America reach the lowest uninsured rate on record,” said Kevin Counihan, marketplace CEO for the Centers for Medicare & Medicaid Services.
And, he said, “It’s no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality rather than by denying coverage to people with pre-existing conditions.”
HHS said that some of Aetna’s rivals, including Centene, Molina, Cigna and Florida Blue have expanded their ACA offerings and “continue to speak optimistically” about their ACA business.
The HHS also said that Aetna’s 838,000 ACA customers account for only about 6.6 percent of the individual ACA market of nearly 12.7 million.
Shares of Aetna and Humana were up fractionally in late-afternoon trading, slightly more than broader markets.
The antitrust trial between the Justice Department and Aetna/Humana is scheduled to begin Dec. 5.