Citing heavy losses tied to its low cost insurance plans, one of the largest health insurers in the United States—Aetna Group—recently announced that, beginning in 2017, it will no longer participate in the Affordable Care Act health care program, also known as Obamacare, in 11 of 15 states—242 of 778 counties nationwide. Aetna is the third major insurer to announce similar pull backs.
The change reflects a decline in individual health care plans offered by the company of about 70 percent. Aetna will continue to offer certain plans in four states—Delaware, Virginia, Iowa, and Nebraska.
In total, the company reported pre-tax losses of $430 million in the first half of 2015 ($200 million in the second quarter). These losses reflected all individual health care plans—including policies that do not fall under Obamacare exchanges. The policies will remain in effect through the end of the year, but enrollees must sign-up for a new health care plan for 2017.
An estimated 11 million people have purchased health insurance through the Affordable Care Act exchanges to date. Following a similar path as other insurers—including the leading U.S. health insurance provider, United Health Group—Aetna blamed its losses on heavier than expected use of the health care plans by sick people.
Successful insurance companies need healthy enrollees to help balance health plan members who are ill and use their policies frequently.
The insurance company may rejoin the exchanges in the second half of 2017, however. Aetna CEO Mark Bertolini said the company, "will continue to evaluate our participation in individual public exchanges while gaining additional insight from the counties where we will maintain our presence, and may expand our footprint in the future should there be meaningful exchange-related policy improvements."
He also said, "As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision."
Aetna’s announcement came as the U.S. Justice Department continues its lawsuit to block the company from acquiring Humana, which the government says would violate anti-trust laws. Aetna maintains that the acquisition would lower costs and expand choices for consumers. The lawsuit was filed in July. Another proposed merger—between Anthem and Cigna—was also blocked by the Justice Department.
According to The Huffington Post, based on a letter from Bertolini to the Department of Justice, which was obtained through the Freedom of Information Act, Aetna’s pull out is directly related to this lawsuit. In the letter, Bertolini warned that if the Justice Department blocked the merger, the company could "no longer sustain" its losses and would need to change directions. While some view Aetna's move as proof the Affordable Care Act is failing, others see the action as an attempt to force a controversial business deal.