Aetna Withdraws From Obamacare As Payback For Blocked Merger

Aetna has announced that it is pulling out of the Obamacare exchanges in 11 states. The states effected are Arizona, Texas, Missouri, Illinois, Kentucky, Ohio, Pennsylvania, North and South Carolina, Georgia, and Florida. This is unquestionably a serious blow for Obamacare as Aetna was and is a major player in exchanges around the country. Other health care providers such as United Healthcare have also announced that they were abandoning Obamacare, but those companies really were minimally players in the health exchanges.  Aetna claims that they were losing too much money because not enough younger, healthy people were signing up for their plans. But earlier this year, they painted a slightly more positive picture of their experience with Obamacare, indicating a possible expansion of their offerings. Overall, premiums for Obamacare have come in under Congressional Budget Office (CBO) initial estimates primarily because healthcare companies wanted to offer competitive rates in order to attract new customers, even of that meant operating at a loss. Aetna apparently felt that way earlier this year when they said on an earnings call, "We see this as a good investment, hoping that we have an administration and a Congress that will allow us to change the product like we change Medicare every year, and we change Medicaid every year."

What changed for Aetna in the intervening months was the Justice Department blocking the proposed merger of Aetna and Humana on antitrust grounds. In fact, Aetna specifically threatened pulling out of Obamacare in a letter to the Justice Department regarding the proposed merger. The letter stated, "[I]f 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 .... [I]nstead of expanding to 20 states next year, we would reduce our presence to no more than 10 states .… [I]t 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. By contrast, if the deal proceeds without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies ... to supporting even more public exchange coverage over the next few years."

Now the company claims that the second quarter results showed increasing losses on the exchanges and that is the reason for their pullout. But it is striking how their actions reflect almost exactly what they threatened to do in their letter DOJ.  So the real question is whether this is payback for the blocked merger or is Aetna really losing more money than they could handle on these exchanges. Certainly, the abrupt turnaround in the company's attitude from the first quarter until today indicates that payback is the more probable answer. Whatever the reason, this will give more ammunition to Republicans to do absolutely nothing to resolve some of the issues in Obamacare in the hopes that more companies drop out of the exchanges and that the program collapses because of that.