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Aetna Bows Out of Most Obamacare Exchanges

News  |  By Gregory A. Freeman  
   August 16, 2016

The inability to negotiate acceptable low-price contracts with hospitals, physicians, and other providers, along with high utilization rates, is proving to be more than commercial insurers can handle.

Aetna is creating more doubt about the future of Obamacare by withdrawing late Monday from 11 of the 15 individual exchanges for 2017.

The inability to negotiate acceptable low-price contracts with hospitals, physicians, and other providers, along with high utilization rates, is proving to be more than Aetna and other commercial insurers can handle.


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The Hartford, CT-based insurer's move opens the door to other carriers to rethink their own participation in the exchanges.

Aetna says it will only sell Obamacare products in Delaware, Iowa, Nebraska and Virginia, citing higher than expected utilization costs. The insurer also says it has lost $430 million in its individual policies unit since the health insurance exchanges opened in January 2014.

"More than 40 payers of various sizes have similarly chosen to stop selling plans in one or more rating areas in the individual public exchanges over the 2015 and 2016 plan years, collectively exiting hundreds of rating areas in more than 30 states," Aetna said in a press release.

In April, UnitedHealth said it would quit Obamacare in 16 states to slow its losses. This month Humana made public its plans to cut back on individual policies offered on Obamacare exchanges.

"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 withdrawal is unfortunate, but not surprising, says Michael A. Morrisey, PhD, professor and head of the Department of Health Policy & Management in the School of Public Health at Texas A&M University.

Morrisey notes that in Texas, Aetna was one of seven carriers, including Blue Cross Blue Shield, that reduced the number of plans they offered in 2016 compared to 2015. Aetna reduced its Silver plan offerings by about one-third and had the highest average Silver premium in 2015 but moved aggressively in lowering those premiums in 2016 relative to BCBS.

Two Key Factors

"I think the reduction in the number of plan offerings, the lower relative premiums, and the decision to withdraw revolve around two key issues," Morrisey says.

"The first is the ability to negotiate acceptable low-price contracts with hospitals, physicians and other providers. The second is the ability to attract enough healthy low-utilizers into their plans."

Aetna acknowledged those challenges in its statement of surrender: "Providing affordable, high-quality healthcare options to consumers is not possible without a balanced risk pool. Fifty-five percent of our individual on-exchange membership is new in 2016, and in the second quarter we saw individuals in need of high-cost care represent an even larger share of our on-exchange population. This population dynamic, coupled with the current inadequate risk adjustment mechanism, results in substantial upward pressure on premiums and creates significant sustainability concerns."

Morrisey suspects that in 2016 Aetna eliminated offerings in communities where it could not obtain competitive hospital and physician prices. The lower prices, however, weren't enough to mitigate the high utilization it was experiencing among those who enrolled, Aetna they chose to withdraw, he says.

"Going forward, this experience and that of other carriers who are rethinking their exchange participation suggests we should expect continued aggressive price negotiation with providers, higher premiums, and more selected market withdrawals from the exchanges as the carriers try to deal with the disproportionately sicker populations that are enrolling in their exchange plans," Morrisey says. 

Gregory A. Freeman is a contributing writer for HealthLeaders.

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