Aetna exit undercuts Obamacare, stokes fears of ‘low-competition regions’

Aetna was supposed to be one of Obamacare’s success stories — one of the nation’s biggest and best-known insurers sticking with the health insurance program even as others dropped out last year.

Yet the Connecticut-based company announced this week that it was severely cutting back its involvement in the health care law’s exchanges, fueling more uncertainty about whether Obamacare can hang on without major changes and giving Republicans fresh ammunition on the campaign trail.

Combined with the recent defections of UnitedHealth Group and Humana, which ditched offerings in a number of states citing the costs of insuring a sicker-than-expected customer pool, Aetna’s decision could deprive consumers on the Obamacare state exchanges of choices, undercutting the competition that was supposed to be a key selling point of the president’s landmark legislative achievement.

“Definitely we are concerned that we are going to have more low-competition regions in 2017,” said Caroline Pearson, senior vice president for Avalere Health, a Washington-based consultancy that tracks the law.

Aetna, which covered more than 800,000 people this year, said late Monday that it plans to pull out from 11 of the 15 states where it offered plans on Obamacare’s exchanges, remaining in the markets in just Delaware, Iowa, Nebraska and Virginia.

It also scrapped plans to expand into new territory, leaving customers looking to buy health care plans on Obamacare’s exchanges in at least one part of the U.S. — Pinal County of Arizona — in danger of needing a rescue next year.

As it stands, 8,500 Arizona customers could have no exchange coverage options next year since Blue Cross Blue Shield and UnitedHealth’s All Savers plans pulled out and Aetna backtracked on its plans to enter the county, said Stephen Briggs, a spokesman for the state’s insurance regulation agency.

State regulators and the Health and Human Services Department are trying to attract another insurer to the exchange so that Pinal County residents can qualify for taxpayer subsidies that defray monthly premiums.

But Republicans, including presidential nominee Donald Trump, said the better answer is to scrap the 6-year-old health care law and start over.

“Aetna’s decision to leave the Affordable Care Act’s public marketplaces is the latest blow to this broken law that is slowly imploding under its regulatory red tape,” said Dan Kowalski, deputy national policy director for Mr. Trump’s campaign.

Democratic presidential nominee Hillary Clinton, though, has vowed to defend and build on Mr. Obama’s overhaul. She supports the idea of a government-run “public option” that would compete with private insurers.

A public option was considered — and nixed — during the 2009 debate over the Affordable Care Act, and analysts still doubt it will happen.

“I think the politics of trying to get a public option passed are nearly impossible, frankly, regardless of the outcome of the election,” said Ms. Pearson.

She said Congress is more likely to consider other backstops for the health care law, including a “reinsurance” program that mitigates losses among insurers that took on higher-cost enrollees, but which is set to disappear after this year.

States scramble

For now, though, states are scrambling in the wake of Aetna’s decision to cut back.

In Pennsylvania, regulators said they had been expecting four insurers to offer plans in the Philadelphia region but are now down to two with the pullouts of UnitedHealth and Aetna.

Aetna’s decision to withdraw from both of the Carolinas could leave customers in either state with one choice — Blue Cross Blue Shield — on its exchanges next year, though Cigna wants to sell to customers in the Raleigh area.

“I am angered by the impact Aetna’s decision will have on Tar Heel families and our market,” North Carolina Insurance Commissioner Wayne Goodwin said.

Obamacare has covered millions of Americans in its first three years, but large insurers say they are struggling to balance their ledger sheets after the law ushered in a series of major changes. Most notably, insurers could no longer seek out profits by denying sicker customers.

Yet healthier customers didn’t sign up in large enough numbers, forcing some participating insurers to pay out more than they took in. As a result, many insurers are requesting double-digit premium hikes for the next plan year, something Republicans have seized upon as validation of their yearslong fight to kill Obamacare.

“As competition continues to dwindle in Obamacare’s exchanges, Americans continue to see fewer options and increasing costs,” said Sen. Ted Cruz, Texas Republican. “Sadly, this is no surprise to many conservatives who warned of the dangers of a government-run health care system.”

Sixteen out of 23 nonprofit co-op plans that were supposed to give consumers a leg up in an industry dominated by corporate players have failed, prompting Republican lawmakers to ask whether the administration will recover $1.7 billion in taxpayer loans to the failed plans.

The administration, meanwhile, said it is no surprise that companies “are adapting at different rates” to Obamacare’s rules. It said it expects the risk pool to get healthier over time and that it is making adjustments so that people don’t enroll in exchange plans only when they get sick.

Larry Levitt, a senior vice president at the nonpartisan Kaiser Family Foundation, said some insurers — particularly those with track records of serving low-income patients through Medicaid — have found ways to make money under the program.

“But it’s clear at this point that there’s going to be less competition in the marketplaces in 2017. The next open-enrollment period will be key. If enrollment grows in 2017, many of the current concerns will begin to fade,” he said. “But if enrollment next year stagnates, it will likely trigger a debate about fixes to the law, with big disagreement among Democrats and Republicans about what those fixes should be.”