Aetna will drastically cut back its 2017 participation on the individual markets, the for-profit insurer said Monday evening, just months after expressing optimism in the future of the Affordable Care Act's exchanges.
Aetna's about-face builds on its pessimistic second-quarter earnings as well as the actions of two other large publicly traded insurers. UnitedHealth Group and Humana similarly decided to scale back their ACA plans after suffering larger-than-expected losses.
Aetna and Humana also are fighting the U.S. Justice Department to push through their pending merger, raising questions of whether the ACA retreat is a negotiating tactic.
Starting in the 2017 plan year, Aetna will drop its exchange presence from 15 states to four, forcing hundreds of thousands of people to switch to new plans. The remaining states where Aetna will sell on-exchange policies are Delaware, Iowa, Nebraska and Virginia. Aetna exchange plans will be available in 242 counties, down from 778 this year.
"As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision," Aetna CEO Mark Bertolini said in a statement. But, he argued, "providing affordable, high-quality healthcare options to consumers is not possible without a balanced risk pool." Aetna has lost more than $300 million on the exchanges so far in 2016.
The ACA's marketplaces have experienced several setbacks over the past few years, ranging from the technological meltdown when the exchanges launched in late 2013 to the collapse of many not-for-profit co-ops to the lower-than-expected enrollment that has featured many sicker people and few younger, healthier people—an economic concept known as adverse selection. Many insurers also have sued the federal government demanding full payment from the risk-corridor program. The ACA established risk corridors, but the Republican-led Congress stymied funding.
HHS downplayed Aetna's decision in a statement Monday night, saying many insurers will still compete in the exchanges next year. However, premiums are on track to be much higher to account for the higher medical claims insurers have recorded. The government expects to make some changes to the public exchanges, such as retooling the risk-adjustment formula.
"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," HealthCare.gov CEO Kevin Counihan said.
It's worth noting Aetna is not withdrawing entirely from the exchanges, indicating the company could ramp up its footprint again if the exchange risk pool stabilizes and shows signs of more stable profitability. Insurers cannot re-enter the exchanges for five years if they decide to make a complete exit.
But some observers have argued that for-profit insurers, which are committed to returning money to shareholders at all costs, should not have the latitude to reduce ACA participation to a small, immaterial size, especially if they make money in other government programs. It allows those companies to shift the insurance risk of sick, expensive ACA enrollees to newer companies and not-for-profit plans.
The big insurers actually remained bullish on the ACA exchanges as recently as last fall. Ten months ago, Bertolini said the public exchanges have "long-term" potential. "We think it's way too early to call it quits on the ACA and on the exchanges," Bertolini said during Aetna's third-quarter call. "We view it still as a big opportunity for the company. I'll remind everybody it's just a little over 6% of our operating revenue, so we still view it as an opportunity to play."
A top UnitedHealth executive similarly said the ACA marketplaces are "a strong, viable growth market for us" just one month before UnitedHealth decided to bail on most of the exchanges.
Ana Gupte, an analyst at investment bank Leerink Partners, was the first to predict Aetna would leave many exchange markets. She sent a research note Friday after meeting with top Aetna executives, including Bertolini, that said Aetna would almost certainly ditch many exchanges but retain "a skeleton presence."