By
Bob Bryan
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 multi-trillion 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
»
“What in the hell do you have to lose?” indeed.
