Aetna Inc. became the last of the five major national health insurers to project a loss on Affordable Care Act plans for 2016, underscoring concerns about the stability of the insurance marketplaces at the heart of the Obama administration’s signature health law.
Aetna said it would re-evaluate its participation in the 15 state exchanges where it currently sells plans, and cancel a planned expansion into more.
The moves come in the wake of recent confirmations by UnitedHealth Group Inc. and Humana Inc. that they would pull back sharply from the ACA’s exchanges amid deepening losses, and a disclosure by Anthem Inc. that it now expects losses on its ACA business in 2016.
“We will look at the financial performance of the business over time, its trajectory and volatility” and the review will be market-by-market, said Aetna Chief Executive Mark T. Bertolini.
Aetna’s options in each county would include sharply limiting the plans it offers there, completely exiting, or remaining fully engaged, he said. Aetna will need to begin making initial decisions by next week because of regulatory deadlines, he said.
Aetna had earlier made regulatory filings indicating it was considering expanding into five new state exchanges in 2017. In at least one of those states, Oklahoma, Aetna’s decision not to come in, along with the earlier announced pullout of UnitedHealth, means there will be just one exchange insurer statewide next year, a spokeswoman for the state insurance regulator said. Other states, such as Alaska and Alabama, were already expected to move to having just one marketplace insurer next year.
The dynamic is worrisome for some state regulators. “As a general rule, more companies, and more competition, is better,” said Mark Fowler, chief of staff at the Alabama Department of Insurance. Humana and UnitedHealth will no longer sell exchange plans in the state next year, leaving only Blue Cross and Blue Shield of Alabama.
Obama administration officials said the exchanges are generally thriving, amid ongoing regulatory moves to strengthen them. “The marketplace continues to grow, and there are companies making money,” said Kevin Griffis, Assistant Secretary for Public Affairs at the Department of Health and Human Services.
Concerns about limited insurance options in rural regions predate the ACA, he said, and federal officials “continue to every day evaluate how we can help the marketplace work better for consumers.”
In a recent article in JAMA, the journal of the American Medical Association, PresidentBarack Obama flagged concerns about insurance options and urged the creation of a public plan “to compete alongside private insurers in areas of the country where competition is limited.”
Aetna currently has about 1.1 million individual ACA plan enrollees, roughly 838,000 of whom purchased their coverage on one of the health law’s exchanges.
Aetna said Tuesday it expected a loss of more than $300 million for the year on its ACA plans amid mounting medical costs among enrollees. The insurer lost about $200 million in the second quarter on the plans. In April, Aetna had said it was aiming to roughly break even on its exchange business this year and move toward profitability in 2017. Then, Mr. Bertolini called its position in the ACA marketplaces a “good investment.”
Despite the exchange results, Aetna posted better-than-expected profit and revenue growth overall in the second quarter and reaffirmed its 2016 operating earnings guidance.
Aetna’s darkening perspective on the ACA business echoes comments by Anthem, which last week went from projecting a slight profit this year to expecting a mid-single-digit percentage loss on ACA plans. Both Aetna and Anthem last month drew antitrust suits from the Justice Department seeking to block major acquisitions—Aetna’s planned merger with Humana, and Anthem’s deal for Cigna Corp. Anthem said that if it is able to complete its Cigna deal, it might go into nine new exchange states.
The rapid shifts in outlook, along with the withdrawals, are signs of continued upheaval in the ACA marketplaces in their third year, analysts said. “This market is very volatile,” said Deep Banerjee, an analyst with S&P Global Ratings.
Not all insurers are retrenching. Cigna, though it said it expected a loss this year on its exchange business, still plans to expand into a few new markets. Cigna, by revenue the smallest of the five national insurers after UnitedHealth, Anthem, Aetna and Humana, has a limited ACA presence and enrollment, however.
In addition, a number of Medicaid-focused insurers continue to do well. Molina Healthcare Inc., for instance, is making a profit on its exchange business and plans to extend its offerings to 137 counties in 2017, from 118 this year.
The Medicaid insurers may have several advantages over companies grounded in traditional commercial coverage, said Jim O’Connor, a principal at consultants Milliman Inc. Their plan designs often include lower-cost and more limited networks of health-care providers, as well as managed-care features like requirements that consumers get referrals to see specialist physicians, he said. Their clientele, which is often relatively low-income, may be younger and tend to have lower health costs than other exchange enrollees, he said.