Aetna Announces Large Reduction in ACA Exchange Participation
- Aug 22, 2016
Following in the footsteps of other large insurers UnitedHealth Group and Humana, Aetna announced on August 15 they will be significantly scaling back participation in the Affordable Care Act (“ACA”) insurance exchanges. In 2017, Aetna plans to operate in just 4 States, down from 15 States this year. In Aetna’s press release, CEO Mark Bertolini blames financial losses as the reason for the scale back:
“Following a thorough business review and in light of a second-quarter pretax loss of $200 million and total pretax losses of more than $430 million since January 2014 in our individual products, we have decided to reduce our individual public exchange presence in 2017, which will limit our financial exposure moving forward.”
However, Aetna’s decision to reduce its presence in the exchanges may be more complicated than these simple financial losses.
In July of 2015, Aetna announced its planned $37 billion acquisition of Humana, in a deal that could be the largest merger ever in the insurance industry. The Department of Justice responded by filing suit to block the deal over antitrust issues. The DOJ took similar action to the proposed Anthem, Inc. acquisition of Cigna Corp, stating that these mergers involving 4 of the largest insurers in the country would “harm consumers, employers and health-care providers with an unacceptable reduction in competition.”
In a July 2016 letter, signed by Bertolini to the Justice Department, Aetna responded with a warning saying if the Humana deal was blocked that “Instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states” and that “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.”
The Aetna pullback from the exchanges, paired with the previous reductions in participation by UnitedHealth Group and Humana, are seen as blows to the ACA. Not only will hundreds of thousands be forced to change their insurance from Aetna to another plan, the absence of Aetna and other major players in the exchanges reduces competition and choices for consumers.
Over the next several months, all eyes will be on this legal battle and the widespread implications it may have on the insurance industry and the ACA insurance exchanges. Coincidentally, all of this will take place as President Obama, the champion the ACA, serves his last few months in office.
If you have any questions, we'd like to hear from you.
Explore More Insights
Top 5 Daily Key Performance Indicators (KPIs) Medical Practices Should Monitor to Improve Financial PerformanceRead More
Receive the latest business insights, analysis, and perspectives from EisnerAmper professionals.