As the 2016 presidential election approaches, analysts and experts are advising healthcare executives to watch and monitor certain issues, such as pharmaceutical spending and healthcare reform, which will surely impact the health insurance industry. Here’s a look at what they recommend keeping a close eye on in particular.
Negative headlines in the past few weeks seem to suggest deep trouble for the Affordable Care Act’s (ACA) marketplaces. Several insurance plans have requested double-digit premium increases for 2017—and Aetna is the third major insurer to announce it is pulling out of several state marketplaces next year. But how concerned should we be about these developments and are there policy options to consider?
This year, premium requests by carriers have been higher on average than last year. Part of the reason for the increase is the phase-out of the law’s reinsurance program, which reimbursed carriers for high claims costs. The program has lowered premiums by as much as 14 percent, and without it carriers are raising their premiums to compensate. But even if final premiums in many plans are higher, most people who will enroll in marketplace plans this year will not pay much more than they did in 2015. This is because more than 80 percent of marketplace enrollees receive tax credits to help pay their premiums, which means most of the increase will be absorbed by the credits. Marketplace customers are also highly price-sensitive and will likely shop for the best deal. Last year, people who received tax credits through the federal marketplace experienced an average premium increase of only 4 percent.
The best argument for a single-payer health plan is the recent decision by giant health insurer Aetna to bail out next year from 11 of the 15 states where it sells Obamacare plans.Aetna’s decision follows similar moves by UnitedHealth Group, the nation’s largest health insurer, and by Humana, another one of the giants.
All claim they’re not making enough money because too many people with serious health problems are using the Obamacare exchanges, and not enough healthy people are signing up.
The problem isn’t Obamacare per se. It lies in the structure of private markets for health insurance – which creates powerful incentives to avoid sick people and attract healthy ones. Obamacare is just making this structural problem more obvious.
In a nutshell, the more sick people and the fewer healthy people a private for-profit insurer attracts, the less competitive that insurer becomes relative to other insurers that don’t attract as high a percentage of the sick but a higher percentage of the healthy.
Eventually, insurers that take in too many sick and too few healthy people are driven out of business.
If insurers had no idea who’d be sick and who’d be healthy when they sign up for insurance (and keep them insured at the same price even after they become sick), this wouldn’t be a problem. But they do know – and they’re developing more and more sophisticated ways of finding out.
Mark Bertolini, CEO of Aetna
It’s only Thursday, but it’s probably safe to announce that the winner of Healthcare Hypocrite of the Week is Aetna Chairman and CEO Mark Bertolini. And it’s not because Elizabeth Holmes and Martin Shkreli have managed to stay out of the news for a while.
Despite calling the Affordable Care Act business a “good investment” as recently as April, Bertolini has decided to pull Aetna out of most of the public health insurance exchanges. Initially, he cited the ACA risk pools as being unsustainable — in other words, too many old people with chronic illnesses and not enough young and spry customers to mitigate the risk. But as it turns out his actions may have been prompted by a desire to get even when the insurer didn’t get its way on a business deal.
On Monday, Aetna announced that it was pulling out of public individual insurance exchanges in all but four states. For the 2017 plan year, the Hartford, Connecticut-based insurer will only participate in the exchanges in 252 counties in Delaware, Iowa, Nebraska and Virginia. The reason? The company said it lost $200 million on individual plans in the second quarter and $430 million since the Obamacare insurance mandate took effect in 2014.
As major insurers UnitedHealth, Humana and Aetna — along with smaller insurers like the Scott & White Health Plan in Texas — plan to leave theObamacare insurance markets, the exodus will leave some states without much competition on the exchanges.
A new study by Avalere predicts one-third of the country will have no exchange plan competition in 2017. Seven states: Alaska, Alabama, Kansas, North Carolina, Oklahoma, South Carolina and Wyoming, will have only one carrier per rating region in every region in the state, the Avalere study said.
States divide up their exchange market region into rating areas. Consumers may only purchase plans offered within the rating region in which they reside.
Nearly 55 percent of exchange market rating regions have two or fewer carriers, the Avalere study said.
Aetna CEO Mark Bertolini
Aetna warned the Department of Justice in a July 5 letter that it would leave the public exchange market if the agency went forward and blocked its merger with Humana.
“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,” Aetna CEO Mark Bertolini said in the letter. “Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint.”
The letter to Ryan M. Kantor, assistant chief for litigation in the Antitrust Division, was sent days before the DOJ’s injunction blocking Aetna’s $37 billion merger with Humana, and also Anthem’s planned $54 billion deal with Cigna.
This week, Aetna announced it was exiting the Obamacare-created exchange market in all but four states in 2017, a reduction of its current participation in 15 states.
However, Aetna left the exchange markets after seeing deteriorating numbers in its second quarter results, the insurer said in a request for comment today.
“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,” Aetna said.
Giant insurer Aetna announced this week that it was withdrawing from the Obamacare exchanges in 11 of the 15 states it had been doing business, becoming the third major insurance company to scale back its offerings dramatically in the face of heavy losses. The news led to a chorus of “I told you so’s” from critics of the 2010 healthcare law, who have long predicted that it would collapse under its own weight. But they are confusing the growing pains of a new market with the death rattle of a failing one.
It’s important to bear in mind what Obamacare, formally known as the Patient Protection and Affordable Care Act, set out to do. Over the long term, it sought to improve the quality of healthcare and rein in costs — an ambitious effort that may not yield significant results for years, if ever. In the short term, its goal was to extend insurance coverage to millions of uninsured Americans. To do so, it barred insurers from denying coverage or charging higher rates to those with preexisting conditions, required all adults to obtain coverage and offered subsidies to help poorer households pay their insurance premiums.
These changes reinvented the market for individual policies, which serves those not covered by large employer plans or government-run health programs. No longer could insurers minimize their risk by denying coverage to or gouging those with preexisting conditions. The new subsidies also attracted many previously uninsured people who had no track record to guide insurers on their needs and costs.
The result was a hotly competitive market with winners and, yes, losers. The insurance companies that have done well include those with experience serving low-income communities, as well as those in states such as California that have worked hard to bring young and healthy customers into the market. But Aetna and UnitedHealth, which announced in April that it would withdraw from almost all the Obamacare exchanges it had entered, had previously focused on serving large employers, a much less risky and volatile market.
All five members of the Wadstein family have Covered California’s most comprehensive — and expensive — level of health insurance, even though the two youngest children are the only ones who need that kind of plan.
Zachariah, 8, and Zoey, 2, have a serious metabolic disorder, but the El Cajon family was told it couldn’t purchase a benefit-rich plan for them and a separate, cheaper policy for the other three, said their mom, Christine Wadstein.
That’s about to change. This month, Covered California began making it easier for families like the Wadsteins to choose different health plans for different members of the family.
HENRY KOTULA 