(Story updated at 12:27 p.m. ET)
National insurer Aetna has no plans to re-enter the ACA exchanges in any of the 11 states it exited earlier this year. That's despite the public scolding Aetna received earlier this month from a federal judge who concluded that Aetna pulled out of the exchanges to improve the chances of closing its merger with Humana, and that it wasn't a business decision related to financial losses.
Instead, the Hartford, Conn.-based insurer will continue to evaluate its 2018 participation in the four states where it currently sells exchange plans.
“We have no intention of being in the market for 2018,” Aetna CEO Mark Bertolini said on an investor call Tuesday to announce the insurer's fourth-quarter earnings. “Where we stand, we'd have to have markets worked up, prices worked up" by April 2017 for 2018 plans, he told investors, "in order to apply, and there is no possible way we'd be prepared to do that given the unclear nature of where regulation is headed.”
Other insurers are also grappling with how to plan for the future when it's unclear what the next iteration of healthcare reform will look like once the GOP-controlled Congress dismantles the ACA.
Bertolini said losses stemming from plans sold on the individual market were $100 million more than previously projected. In October, Aetna predicted a full-year operating loss in its individual commercial products of $350 million.
Despite exchange losses and losing hundreds of thousands of medical members in 2016, higher premiums in Aetna's Medicare and Medicaid businesses helped the insurer build revenue.
Aetna's total medical membership dropped by 377,000 members in 2016 to 23.1 million as of Dec. 31. The insurer lost members in its individual commercial insurance business, where it has been dealing with higher medical costs from those enrolled in the ACA insurance exchanges.
But it built up membership in Medicare Advantage and Medicaid plans, which generate higher revenue. Medicare Advantage enrollment grew by 8.9% in the fourth quarter compared with the same time in 2015, and Medicaid membership grew by 7.6%. Aetna also expects to grow Medicare Advantage membership by another 120,000 members in the first quarter of 2017. That will be offset by membership declines from its lost Nebraska Medicaid contract.
Aetna also said it will serve just 240,000 exchange members in 2017, down from 965,000 at the end of 2016.
Commercial insurance membership declined by 4% since 2015. Like other insurers, Aetna has been struggling to turn a profit on the plans it sells through the ACA insurance exchanges. Members in those plans tend to be older and sicker with higher medical costs. So Aetna pulled out of exchanges in 11 states for 2017.
A federal judge earlier this month, however, concluded that Aetna reduced its exchange participation not for business reasons, but to make good on threats to exit some exchanges if the Justice Department sued to block its controversial tie-up with Humana. The judge blocked the $37 billion merger, saying it would harm competition in Medicare Advantage and on the ACA exchanges. Aetna is weighing its options for an appeal and will announce how it plans to proceed by Feb. 15, the deadline of its merger agreement with Humana.
In the meantime, Bertolini said Aetna is investing in digital tools and value-based care models, including a new joint venture health plan with Minnesota system Allina Health announced earlier this month. “We remain convinced of the strength of Aetna's positioning and growth trajectory as a stand-alone company,” he said.
Despite the distractions, Aetna grew revenue by 4.5% to $15.7 billion in the fourth quarter of 2016 thanks to the higher fees and membership in its Medicare Advantage and Medicaid business. For the full year, revenue increased 4.7% to $60.2 billion compared with 2015.
Even so, Aetna's net income fell to $139 million in the fourth quarter, down 57% compared with the same period the year before.
That drop in net income was primarily driven by “restructuring costs,” including the introduction of a voluntary early retirement program for employees, Aetna said. In October, Aetna announced plans for layoffs and an early retirement package to reduce operating costs. Net income in 2016 dropped 5% to $2.3 billion year over year.
Because of higher individual plan costs, Aetna's medical loss ratio also grew to 82.1% from 81.9% in 2015, meaning it spent 82 cents in medical claims for every premium dollar it collected.
While Aetna won't have much business tied to the exchanges next year, Bertolini said the insurer will continue to work with lawmakers and insurance regulators to preserve “positive aspects” of the ACA while developing new consumer-based approaches to healthcare delivery.
“The intended goals of the ACA have not been achieved,” he said, adding that he's optimistic “the next wave of healthcare reform will focus on affordability, quality and addressing the needs of millions of Americans who remain uninsured or lack access to affordable healthcare.”
