Alaska, Alabama, Kansas, North Carolina, Oklahoma, South Carolina and Wyoming, will have only one carrier per region.
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 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.
Aetna announced late Monday it was exiting nearly 70% of the ACA markets it participated in next year (parsing down 778 counties to 242).
On Monday, CEO Mark Bertolini cited losses in the millions as the reason for the decision. However, the July letter obtained by The Huffington Post implies the decision was more influenced by the Justice Department lawsuit.
In late July, the Justice Department sued to block both insurance mergers, arguing that competition is important to keep premiums down and that the deals “would leave much of the multitrillion-dollar health insurance industry in the hands of three mammoth insurance companies.”
They also rejected the Wal-Mart argument, which is related to what economists call “monopsony,” a concentration of buying power.
Monopsony is the opposite of monopoly: Instead of using market dominance to raise prices for consumers, huge buyers force down prices from suppliers. Wal-Mart is often described as holding monopsony-like power.
But critics of the insurance deals say monopsony can go too far. If the buyer pushes prices too low, suppliers stop producing, making needed goods and services unavailable.
“As a result of the merger, Anthem likely would reduce the rates that … providers earn by providing medical care to their patients,” the Justice Department argued. “This reduction in reimbursement rates likely would lead to a reduction in consumers’ access to medical care.”
Retail titan Walmart uses its market dominance to inflict “ruthless,” “brutal” and “relentless” pressure on prices charged by suppliers, business writers frequently report.
What if huge health insurance companies could push down prices charged by hospitals and doctors in the same way?
The idea is getting new attention as already painful health costs accelerate and major medical insurers seek to merge into three enormous firms.
Now that hospitals have themselves combined, in many cases, into companies that dominate their communities, insurance executives argue the only way to fight bigness is bigness.
A federal judge said Thursday it is unlikely he would be able to rule on both the Aetna-Humana and Anthem-Cigna antitrust suits by the end of the year, according to Reuters.
Lawyers from Anthem and Aetna argued this week that Judge John Bates should hear their cases before the end of 2016. The Justice Department filed suits in July against both mergers, citing competition concerns that it says would increase prices for consumers and stunt innovation.
Bates said in a hearing Thursday that both requests cannot be fulfilled, but did not say which case would be sent for reassignment.
“That’s my determination: that I can’t do both,” Bates said in the hearing, according to Reuters.
Anthem’s lawyers, though, point out that if the case is not settled by the end of the year, Cigna will likely refuse to extend their agreement, thus dooming the merger, Reuters notes.
In an interview with FierceHealthPayer, antitrust lawyer David Balto indicated that the Anthem-Cigna merger is “like climbing Mount Everest,” and that they are less poised to battle the DOJ than Aetna and Humana.
With health insurers struggling to turn a profit on the Affordable Care Act exchanges and premiums likely to rise, many have wondered what the future will hold for this prominent feature of the Obama administration’s healthcare reform law.
As health care consolidation accelerates nationwide, a new study shows that hospital prices in two of California’s largest health systems were 25 percent higher than at other hospitals around the state.
HENRY KOTULA 