SOURCE:
ZERO HEDGEURL:
http://www.zerohedge.com/news/2016-08-02/aetna-posts-300-million-obamacare-loss-warns-may-exit-altogetherby: Tyler Durden
After every other major US health insurance provider already admitted to generating substantial losses on the Affordable Care Act, known as Obamcare, earlier today Aetna became the latest to report that its annual loss on Obamacare plans would be more than $300 million, and said it had scrapped plans to further expand its Obamacare business next year. More ominously, Aetna joined the biggest US health insurer UnitedHealth in reviewing how, if at all, it would continue providing ACA services in the 15 states it's currently in.
The move, coming after a similar shift in tone last week by Anthem, is the latest sign of instability and financial pressures in the marketplaces that are at the heart of the health law. It also confirms that in its current iteration, Obamacare simply does not work and will require a major overhaul by the next administration, one which could lead to even higher premiums for plan participants as well as for subsidy providers, i.e., taxpayers.
Aetna, which had previously expressed relative optimism about the ACA exchanges, said it was setting up a reserve of $65 million to account for expected losses on individual plans over the rest of 2016. The company also said it no longer expects to reach breakeven in 2016 on individual plans.
“While we are pleased with our overall results, in light of updated 2016 projections for our individual products and the significant structural challenges facing the public exchanges, we intend to withdraw all of our 2017 public exchange expansion plans, and are undertaking a complete evaluation of future participation in our current 15-state footprint,” said Aetna Chief Executive Mark T. Bertolini. Aetna had previously made regulatory filings indicating it was considering growing into five new state marketplaces in 2017.
“
Nobody is getting adequately reimbursed,” unless we start including specialty pharma which current risk adjustment mechanism doesn’t, Bertolini added during the Q2 call, explaining that the risk-adjustment mechanism “a zero sum game."
Aetna's shift represents a significant revision to its previous position on Obamacare. In April, the insurer said that after a loss last year, it was aiming to roughly break even on its exchange business this year and move toward profitability in 2017. Then, Mr. Bertolini called its position in the ACA marketplaces a “good investment.” The five new states in which Aetna was considering expanding were Maine, Oklahoma, New Jersey, Kansas and Indiana. Not so much anymore: according to Bertolini, "
we are evaluating our footprint as it exists today to understand what solutions we can put forward to either fix the business or exit the business.”
Surprisingly, despite the poor exchange results, Aetna still posted better-than-expected profit and revenue growth in the second quarter and reaffirmed its 2016 operating earnings guidance.
As the WSJ adds, Aetna’s darkening perspective on the ACA business echoes comments by Anthem, which last week went from projecting a slight profit this year to expecting a mid-single-digit loss on ACA plans. Anthem roughly broke even on individual plans in 2015 and had a positive margin in 2014. Anthem said it expected improvement on its results next year, but also that it would re-examine its full-on commitment to the exchanges. UnitedHealth Group Inc. and Humana have in recent weeks deepened their projected 2016 exchange losses and confirmed they will largely withdraw from the business next year.
In what is likely a shocking revelation for the administration, a big part of the problem, according to S&P analysts, has come from insurers finding that
enrollees were running up medical costs greater than they expected when the companies set their premiums. Who would have thought that when presented with a quasi-blank check, the recently uninsured would milk it for all it is worth?
So what happens next?
WSJ predicts that the pullbacks by UnitedHealth and Humana, in addition to Aetna’s possible move,
will likely sharply increase the regions with limited or no competition among insurers on the exchanges. That will put a heavy weight on Blue Cross Blue Shield insurers, which in some states, including Alaska, as well as several largely-rural areas of others, are now expected to offer the only ACA marketplace plans. “What you end up with is the not-for-profit Blues and other regional plans becoming the insurer of last resort in parts of the country,” said Sam Glick, a partner with consulting firm Oliver Wyman, a unit of Marsh & McLennan Cos.
The situation is “a real concern,” he said, particularly since a number of the Blue insurers are themselves losing money on the exchange business.In other words, all the negatives of a single-payor system with none of the positives.
What about those states where the ACA services will remain? Why more of the same, which means another year of double-digit increases in premiums.
The punchline? As we reported back in May, most Americans will see the surge in their health insurance premiums on the unfortunate, for Democrats, date: November 1, or just one week before the presidential election. As Politico said: "the last thing Democrats want to contend with just a week before the 2016 presidential election is an outcry over double-digit insurance hikes as millions of Americans begin signing up for Obamacare."
Then again,
what difference will a double digit health insurance price surge make?
