Now we know the real reason Aetna bailed on Obamacare
Now we know the real reason Aetna bailed on Obamacare
Bob Bryan, Business Insider Wed, Aug 17 6:29 AM PDT
On Monday night, news broke that one of the five largest insurers in the US, Aetna, was leaving 70% of the counties in which it offers insurance through the Affordable Care Act's public healthcare exchanges.
The move was seen as a huge blow to the future of the act, making Aetna the third large insurer, after United Healthcare and Humana, to significantly reduce its Obamacare business.
Aetna cited the large losses that the company has incurred from the exchange business — $200 million in the second quarter alone — when explaining its decision to roll back its business.
These statements, however, appeared to be a dramatic turnaround from the company's first-quarter earnings call in April, when CEO Mark Bertolini said the firm planned to stay in the exchanges and that the company was "in a very good place to make this a sustainable program."
Now, however, it appears a large reason for the shift in tone was the Department of Justice's lawsuit to block Aetna's merger with rival Humana.
A July letter, acquired by Huffington Post reporters Jonathan Cohn and Jeffrey Young , outlined Aetna's thinking on the public exchanges if the deal with Humana were blocked. The letter from Bertolini to the DOJ outlined the effect of a possible merger on its Affordable Care Act business.
For one thing, Bertolini notes that the cost savings from the Humana deal would allow the companies to further expand coverage into parts of the US.
"As we add new territories, given the additional startup costs of each new territory, we will incur additional losses," the letter said . "Our ability to withstand these losses is dependent on our achieving anticipated synergies in the Humana acquisition."
Additionally, the letter seemed to foretell the move on Monday. Here's the key passage (emphasis added):
"Our analysis to date makes clear that if 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.
"We currently plan, as part of our strategy following the acquisition, to expand from 15 states in 2016 to 20 states in 2017. However, if we are in the midst of litigation over the Humana transaction, given the risks described above, we will not be able to expand to the five additional states.
"In addition, we would also withdraw from at least five additional states where generating a market return would take too long for us to justify, given the costs associated with a potential breakup of the transaction. In other words, instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states."
In other words, the cost of fighting the DOJ would make Aetna unable to sustain the losses incurred from the public exchanges.
According to a letter from the DOJ provided by Aetna, the DOJ asked the company what the effect would be on the firm's Affordable Care Act business if the merger were not completed. Thus, Aetna responded with its letter.
A spokesperson for Aetna said the decision to roll back the coverage was not because of the DOJ's lawsuit, but rather realizing the full details of the losses. The statement from the spokesperson reads, in part:
"In the time since we submitted our written response to DOJ and provided a courtesy copy to [the Department of Health and Human Services], we gained full visibility into our second quarter individual public exchange results, which — similar to other participants on the public exchanges — showed a significant deterioration. That deterioration, and not the DOJ challenge to our Humana transaction, is ultimately what drove us to announce the narrowing of our public exchange presence for the 2017 plan year.
"If the Humana transaction is eventually blocked, which we don't believe it will be, the underlying logic of our written response to DOJ would still apply with regard to the public exchanges where we will participate in 2017."
In the original letter from Aetna to the DOJ, Bertolini said that if the company lost the lawsuit and the deal were eventually scuttled, Aetna would drop its remaining Affordable Care Act business and leave the public exchanges entirely.
The DOJ declined to comment.
The DOJ blocked the merger between Aetna and Humana , along with the merger of fellow big-five insurers Anthem and Cigna, on the grounds that consolidating the industry would lead to lower competition and higher costs for consumers.
"They would leave much of the multitrillion health insurance industry in the hands of just three mammoth companies, restricting competition in key markets," Attorney General Loretta Lynch said when announcing the lawsuit to block the mergers.
Typically the number of independent options available to consumers is correlated with lower costs.
"If the big five were to become the big three, not only would the bank accounts of the American people suffer, but the American people themselves," Lynch said.
The companies countered that the merger would not affect consumers and would allow the combined firms to be more cost-efficient and sustainable.
Read the full letter from Bertolini, via The Huffington Post, here »
https://www.yahoo.com/finance/news/now-know-real-reason-aetna-132900946.html
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The DOJ blocked the merger between Aetna and Humana , along with the merger of fellow big-five insurers Anthem and Cigna, on the grounds that consolidating the industry would lead to lower competition and higher costs for consumers.
"They would leave much of the multitrillion health insurance industry in the hands of just three mammoth companies, restricting competition in key markets," Attorney General Loretta Lynch said when announcing the lawsuit to block the mergers.
Follow the money. Everything goes back to that.
Always follow the money....always.
This is how heavily regulated industries work. It's not a bug of Obamacare, it's a feature. Beneficial Government regulation, not providing good service at efficient cost, it what drives profits in industries dominated by the government. This is probably a power play to get favorable regulation.
And if the government doesn't act favorably, there's no loss to Aetna. The Obamacare exchanges are money losers, the only reason for them to stay is too procure favorable regulatory decisions that offset the losses from Obamacare.
Why is anyone surprised by this?
I'm not surprised but I am glad that they didn't get the merger they wanted and the government didn't buckle to their threat. The ACA is not going to go away. Most likely it will eventually transform into a single payer health plan. The Insurance companies know that the single payer plan is very feasible and they are going to try everything they can to monopolize the industry while they can.
I praise the insurance companies for making their statement and following through with what they said would happen. The obamacre regime will collapse of its own weight and I support anything congress, private companies, individuals, insurance companies acting on their own and in concert to bring it down. We who opposed it celebrate each and every one of its setbacks and failures. It never had majority public support and have no obligation to lift a finger to preserve it.
Gee X- you're very aggressive tonight. So you're not a proponent for affordable health care for everyone? You think people's health should be considered nothing more than another opportunity to make a profit? That doesn't seem like something you would support.
Take out the profit motive and you will eliminate innovation and have severe shortages of people and products.
Aetna acted properly within the terrible framework provided by obamacare.
I don't disagree that the framework was crap. WOW - we agree on something! :0)
I don't oppose affordable health care for everyone. I simply disagree with the method of getting it done. It can be done with a free market for profit capitalist system using the government to provide safety nets as needed rather than try to take something over.
You advocate for single payer? You say you are an independent moderate? 👎🏻
How's your healthcare plan working? Just curious.
Mines working just fine. No complaints.
I didn't say I was advocating. I said the ACA would probably convert into a single payer system.
Not without congress voting to make it happen, it won't. Not going to happen.
X, with the dismal job Congress has done it could very well flip to Democratic control. They should have tried to do something, anything for the American people but this congress chose to do nothing but obstruct. You win and keep in control by working for the people not working for nothing.
Be afraid......be very afraid. Mwah ha ha ha (evil laugh...... cough, hack, wheeze).
The House wont flip and even if it did, you'd never get to 60 senate votes to pass it. You think the tea party resistance to Obama crap care was strong, you aint seen nothing yet if they try single payer.
X - we don't know what is going to happen with the House yet but I think it's safe to say our government is going to hell in a hand basket.
The Obamacare exchanges are money losers,
I've been paying for an ACA plan since January. I've paid just under $900 and have used it once and it paid $105 of my dermatologist's $155 bill. I'm glad to have the plan in case of a catastrophic illness but I rarely go to the doctor and I take no prescriptions. I have to be one of the profitable members!
The American medical business model is shameful. I recently had a spinal problem that was affecting everything between my left pinky and my spine. It was clearly a pinched nerve in my back, and my boss said I should see his chiropractor. I'd never been to one, so I was a little leery, and on my drive home they called me to make an appointment. I went ahead and did it, even though my insurance hadn't even kicked in yet. The guy totally fixed it in three adjustments, but they did everything in their power to try and convince me that to properly fix it I would need to come back for three adjustments per week for 18 months, at $65 per visit - and all dealings with insurance coverage would be on a reimbursement basis between me and my provider.
In other words, their mantra was 'I got mine, Jack'. Their whole operation was offensively capitalistic, and they were quite aggressive in their attempts to get me to commit to setting months of appointments in advance and deciding which payment plan would work best for me. I said I'll get back to you, and quit answering their calls.
Agreed Hal. They healthcare professionals have been pushed into this predatory business practice because of the Insurance companies. In order to make a living and pay back their school loans they become prisoners to the practice of pushing services and procedures that aren't necessary or not as necessary. It's a vicious circle but as you say it's another form of how capitalism has put profit above people.
I get so disgusted with the notion that a country as privileged as the U.S. cannot provide basic healthcare to all of its citizens. There are millions of people throughout the world who have real problems that make Americans' problems look positively meaningless.
I just finished Stars Between the Sun and Moon, by Lucia Jang. It's a memoir detailing her extraordinary defection from North Korea, and the average American wouldn't trade all of their problems for a single aspect of life in North Korea. Being a poor woman in NK means your only hope for survival is to cross the river into China and sell yourself to an unknown Chinese man as a wife. If you're caught, you are imprisoned for years in a place where there is only room to sit, and the only food is a cup of broth with a cabbage leaf if you're lucky. If you're pregnant from being gang raped by a dozen prison guards, you're baby will be birthed on the concrete, stuffed in a plastic bag and shoved in the latrine. The mixture of feces, urine and dead babies will be used to fertilize the crops used to feed the Party members.
How are the insurance companies responsible fir doctors' student loans?! That makes no sense unless your only goal is to vilify insurance companies. If so, we'll done.
I overheard my chiropractor tell a client that the average chiropractor is out of business within two years, because of the burden of their student loans. They have to aggressively push their services to extract the highest dollar they can from every patient. Mine wouldn't even deal with insurance, other than to file with them on your behalf. They get their money up front, non-negotiable, and any insurance hassle is your problem.
In addition, I was probed in my initial consultation for personal information that they could tie to my condition in an effort to sell themselves - much like how a fortune teller operates. When later presented with my 'customized' plan for how to address my pain (which was exactly the same plan they offered to my boss), he made sure to mention how my cured spine will allow me to play with my five grandchildren. That was a concern he made up, not one I offered up. This kind of bullshit has no place in the medical field.
Cerenkov - I didn't say the Insurance companies are responsible for student loans. That's a whole other issue BUT because of the hoops that the Insurance companies make health care providers and patients jump through many people just give up and they don't go and get the care they need and that translates into lower patient participation or clients which means that the doctor's end of being as creative as possible to retain patients and extend services so that they can earn enough to pay off student loans. It's a domino effect in my opinion. That's what I'm speaking of not direct blame.
Do you think Insurance companies are honorable? Do you think they are in it for the health of people or are they in it to make a profit. Health care should NOT be profit driven. That's my opinion. If you are proactive on health care and look towards prevention rather than treating the condition once it develops than you are actually reducing the cost of health care but that will take time and up front sacrifices.
It's all relative. The lower your income is, the more you tend to rely on cheap (fast) food. Poverty develops diabetes, heart conditions, and nutritional deficiencies that spawn a host of ailments. Our model in the US is to keep people sick, and pay for their care with ever increasing premiums. The Hippocratic oath is nothing but a suggestion in a profit driven medical system.