END OF 2018 OPEN ENROLLMENT PERIOD (42 states)

Time: D H M S

Aetna: No Longer Glad They Met Ya. Perhaps a memory enhancer is in order?

May 12, 2016:

Health Insurer Aetna Inc on Wednesday said it plans to continue its Obamacare health insurance business next year in the 15 states where it now participates, and may expand to a few additional states.

"We have submitted rates in all 15 states where we are participating and have no plans at this point to withdraw from any of them," said company spokesman Walt Cherniak. But he noted that a final determination would hinge on binding agreements being signed with the states in September.

Aetna sells the individual coverage on exchanges created by the Affordable Care Act, also called Obamacare. By also filing proposed rates in several other states, Aetna said it had preserved its options to participate in them as well next year. It declined to identify the potential new markets.

The 15 states where it currently participates are Arizona, Delaware, Florida, Georgia, Illinois, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Virginia.

Aetna earlier this year said its Obamacare business had operating losses of about 3 to 4 percent in 2015, with improvements seen in the latter part of the year. It is hoping the business will have a break-even performance in 2016.

In fact, here's the relevant portion of Aetna's first quarterly earnings conference call (4/28/16) from CEO Mark Bertolini:

“We have 911,000 members on the public exchange as individual. We have 1.2 million members that are exchange or ACA-compliant. If we were to go out and buy those members, it would cost us somewhere around $1.2 billion to acquire them. If we were to build out 15 markets, it would cost us somewhere between $600 million to $750 million to enter those markets and build out the capabilities necessary to grow that membership. So in the broad scheme of things, we are well, well below any of those numbers from the standpoint of losses we've incurred in the first two-and-a-half years of this program. So we see this as a good investment…

Certainly sounds like Aetna was full-speed ahead as of 90-odd days ago, yes? I wonder if anything happened between then and now which might have caused them to rethink their assessment of the...

July 21st, 2016:

Anthem, Aetna Sued by U.S. Seeking to Block Insurer Mergers

U.S. antitrust enforcers roundly rejected a pair of proposed deals that would consolidate the nation’s five biggest health insurers into three.

The Justice Department on Thursday sued to block two separate tie-ups -- Anthem Inc.’s $48 billion takeover of rival health insurer Cigna Corp. and Aetna Inc.’s $37 billion bid for Humana Inc. -- saying the deals would raise health-care costs and reduce choice for consumers.

"For most Americans, health insurance is not luxury but a necessity," Attorney General Loretta Lynch said in Washington. "Health insurance can mean the difference between life and death. If the big five were to become the big three, not only would the bank accounts of American people suffer, but the American people themselves."

Oh, right. That.

Well, seeing how that's a completely unrelated business matter, I'm sure it won't have any sort of impact on...

August 15, 2016:

Aetna to Quit Most Obamacare Markets, Joining Major Rivals

Health insurer Aetna Inc. will stop selling individual Obamacare plans next year in 11 of the 15 states where it had been participating in the program, joining other major insurers who’ve pulled out of the government-run markets in the face of mounting losses.

It will exit markets including North Carolina, Pennsylvania and Florida, and keep selling plans in Iowa, Delaware, Nebraska and Virginia, Aetna said in a statement Monday. In most areas it’s exiting, Aetna will offer individual coverage outside of the program’s exchanges.

Oh. Well, I'm sure that was just a sheer coincidence, right? No doubt Aetna will clear this up with an unequivocal statement to put any speculation to...

From Peter Sullivan of The Hill:

Asked if the DOJ’s actions on the merger had any relation to Monday’s announcement, Aetna spokesman TJ Crawford did not directly say yes or no.

“This is a business decision based on higher than projected medical costs that resulted in a second quarter pre-tax loss of $200 million, which we project will grow to in excess of $300 million by the end of 2016,” he said.

Uh-huh. I see.

Anyway, here's the official statement from HealthCare.Gov CEO Kevin Counihan:

“Aetna’s decision to alter its Marketplace participation does not change the fundamental fact that the Health Insurance Marketplace will continue to bring quality coverage to millions of Americans next year and every year after that. It’s no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality rather than by denying coverage to people with preexisting conditions. But the ACA Marketplace is serving more than 11 million people and has helped America reach the lowest uninsured rate on record. With high consumer satisfaction, more people getting care, and an improving risk pool, incoming data continue to show that the future of the Marketplace is strong.”

And yet...

The Affordable Care Act's exchanges have not been a bust for every health insurer. Florida's Blue Cross and Blue Shield affiliate made a profit of almost a half-billion dollars on the ACA's new individual plans last year.

The substantial ACA exchange losses exhibited by large health insurers—such as Health Care Service Corp., Highmark, Humana and UnitedHealth Group—have emboldened the law's critics and worried investors about whether the new marketplaces will ever achieve sustainability.

Yet many other companies, including Medicaid insurers Centene Corp. and Molina Healthcare and now Florida Blue, have had no difficulties making money on the new ACA plans, which often have narrow networks of hospitals and doctors as well as high deductibles.

The Florida Blues recorded a $471 million gross profit on ACA-compliant individual plans in 2015, compared with a $124 million gross profit from those policies in 2014, according to the insurer's financial filings. Those figures represent the underwriting profit and don't subtract the administrative expenses associated with those plans. The Florida Blues enrolled approximately 500,000 people in ACA plans by the end of 2015.

In fact, according to Centene's earnings call...

Next, health insurance marketplaces. Centene's exchange experience continues to be favorable and we are achieving margins at the high end of our targeted range.

...That kind of falls under guidance for 2017, which we will give later. But we are doing well in the exchanges. We've been at the high end, so we feel as though it's continuing to grow it and we are looking forward to talking about that in December relative to 2017.

According to Molina's earnings call...

Operationally, we have addressed the infrastructure problems that contributed to our first-quarter difficulties. Despite the noise around our 2015 estimate change, we are satisfied with our marketplace performance. Through June 30, 2016, the medical care ratio of our marketplace business for 2016 dates of service alone is approximately 78%. This accounts for risk adjustment accruals that we are making for calendar year 2016, and we believe that our marketplace pricing for 2017 is adequate.

According to Cigna's earnings call...

It's important to note, we have seen the performance of what we look at as our newest offerings as being markedly better than the traditional offerings that we had placed in the market and many have in the market. So those newer offerings are aided or driven by very focused and aligned collaborative delivery system models and those are performing better.

As it relates to 2017, you are right. First and foremost, at this point, we plan for and expect to continue to participate.​

Hmmm. I dunno, it's sounding more and more like Andrew Sprung and I have the right idea after all:

There's been a lot of talk about the suspiciously convenient timing between the Justice Dept's announcement that they're suing to block Aetna's merger with Humana and this surprising turnabout announcement by Aetna. The idea here is that Aetna is trying to play hardball with the Obama administration over the merger by trying to blackmail them into backing off on opposition to the merger by holding their ACA participation hostage.

On the other hand, it could also be argued that it's the HHS Dept. which could actually hold the upper hand here, since I assume they can hold those fat, profitable Medicare Advantage contracts out as a bargaining chip in return for requiring Aetna participation in the exchanges. As Andrew Sprung noted:

It seems that insurers are perfectly happy and prosperous competing in the markets where the government is the payer -- Medicaid managed care and Medicare Advantage. What if the ACA had offered all adults under age 65 who lacked access to employer-sponsored insurance a program something like the Basic Health Plans (BHPs) that the law allowed states to establish for people with incomes in the 139-200% FPL range? That is, a program rather like Medicaid, paying perhaps somewhat higher rates, and offering enrollees a choice of plans from among a handful of MCOs? (So far, New York and Minnesota are the only states that have established BHPs.)

In this case, Sprung was putting things in terms of simply expanding managed Medicaid/Medicare across the board to become the de facto "public option"...but regardless, it seems to me that the framing here should really be more of a "loss leader" mindset. Yes, Aetna may lose $300 million on their individual market division this year...but overall they saw an increase in their net income, to over $780 million for the second quarter on top of $720 million in the first quarter. Assuming the 2nd half of the year is similar, that means they're looking at around $3 billion in net income for the year.

This exact "hardball" theme was picked up by Michael Hiltzik of the L.A. Times a couple of days later (he also quoted Andrew Sprung's piece):

It’s easily forgotten that Congress and the Obama administration did the health insurance industry an enormous favor in enacting the Affordable Care Act in 2010.

Several favors, in fact. They placed commercial insurers at the center of Obamacare, giving them most of the responsibility for covering enrollees—and therefore access to an army of new customers. They left in place private insurers’ access to the immense Medicaid pool via Medicaid managed care. They killed the public option, which would have provided a nonprofit counterweight to private insurers, hopefully goading the latter into maintaining competitive pricing and customer service.

One would expect the insurance industry to show some gratitude for these handouts. One would be wrong. The nation’s big insurers haven’t ceased badmouthing Obamacare and grousing about losses, which in many respects are their own fault. Over the last year or so, several have announced they’re withdrawing from the program’s individual exchange market, or threatened to do so.

These threats generally are treated as evidence of flaws in Obamacare that can be rectified only if the government capitulates to the insurers’ demands—for looser benefit mandates and tighter restrictions on special enrollment rights, among other things.

Yet the authorities aren’t entirely powerless. It’s time for the government to push back and deliver the following message to insurers: If you want to reap the profits from participating in public health programs, you’ll have to participate in the Affordable Care Act too. To put it in terms the insurance companies understand: no more cherry-picking.

Well, the hardball is now in the HHS Dept's court. I've no idea whether they have the authority to tie ACA exchange participation in with managed Medicare/Medicaid contracts (and even if they do, it's possible that those contracts are locked in for multiple years at the moment?) but if they do, now would be a good time to look into it.