Why Did Aetna Really Pull Out And What Does This Mean For Obamacare? -VIDEO

2016-08-17_21-23-08

The insurance company Aetna announced on Monday that it will be pulling out of 11 of the 15 states where it offers Obamacare policies. They say they’re pulling out because they’ve lost $430 Million. But I’m not so sure that is the whole story.


As the Huffington Post¬†reported, Aetna’s CEO, Mark Bertolini, sent a letter to the Department of Justice in July threatening to reduce the number of states where they offered Obamacare policies next year if the DOJ blocked their proposed lucrative merger with Humana.

In the letter Bertolini said,

“If the deal was 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….Instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states…..It is very likely that we would need to leave the public exchange business entirely and plan for additional business efficiencies should our deal ultimately be blocked. By contrast, if the deal proceeds without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies….to supporting even more public exchange coverage over the next few years.”

Then the DOJ ended up blocking that merger with Humana.

On Wednesday Aetna said that their decision to quit Obamacare wasn’t a retaliation for the DOJ decision. They said instead it was because they lost $200 Million in the second quarter.

Pennsylvania is one of the states Aetna is pulling out of. However, last year Pennsylvania turned a decent profit. According to a recent filing request, Aetna received more than $71 Million in premiums last year. Aetna made $13.6 Million off of those policies.

When questioned about Pennsylvania’s profit, Aetna’s spokesman T.J. Crawford told CNBC, “We don’t discuss our performance on a state level.”

But whether or not Aetna pulled out because they couldn’t get their merger, the fact remains that this is a blow for Obamacare. And Aetna isn’t the only major insurer that is pulling out. So what does that mean for Obamacare?

The truth is, for all of its faults, Obamacare is actually working really well for millions of Americans. Over 11 million people are covered by Obamacare policies. And 85% of them are receiving federal subsidies. Because of Obamacare, the nation’s uninsured rate has fallen to a record low of 9.1%

This is year 3 of the ACA, and clearly the program is going through some growing pains. There are many problems that do need to be fixed, but it will also take time for the market to settle and work efficiently.

The news is not all bad for insurers. Many insurers are already turning a profit on the exchanges and are expanding into new Obamacare markets. This especially seems to be the case for companies who joined the individual market after focusing on providing Medicaid benefits to low-income Americans.

Experts are admitting that the turmoil is not unexpected. “It’s crucial that both the government and insurers take steps to stabilize the program, but Obamacare is not doomed.”¬†

Sabrina Corlette, who is a research professor at Georgetown University’s Health Policy Institute, said, “It’s a brand new market. It’s volatile but the fundamentals are sound.”

Dan Mendelson, the President of Avalere Health said, “The government will have to get involved. The exchanges are viable in the long-term, but only if the government stabilizes the risk pools. If the markets are strong, insurers will come back.”

The bottom line is that Aetna’s pull out does not mean the end of President Obama’s signature piece of legislation. It does however, magnify the necessity to make changes and improvements to the ACA. But, even if Aetna is deciding to take their ball and go home because they didn’t get their merger, Obamacare will continue. And in all likelihood insurers like Aetna will eventually come back.