No roses, many thorns
On Valentine’s, insurers’ moves cause upheaval in the sector
It was a rough day for the already-roiled U.S. health insurance market: One giant merger was abandoned, another is threatened by infighting, and a major insurer announced it will stop selling coverage on public exchanges in 11 states.
Both merger deals had already been rejected by federal regulators and judges, but the companies were considering appeals to those decisions. Now they both appear to be off.
Aetna said it was abandoning its planned $34 billion purchase of Medicare Advantage provider Humana early Tuesday. Then, later in the day, Cigna said it is suing Anthem to kill a $48 billion acquisition bid.
The deals were conceived as a way to help the insurers increase their enrollment and cut down on expenses in part so they could improve their performances on the Affordable Care Act’s public insurance exchanges. Big insurers have been hit with substantial losses from the
exchanges, even though they represent a relatively small part of their overall business. Many have already cut back their offerings, and that has slashed customer choices in markets around the country.
The collapse of one deal and the uncertain future of the other could hurt shoppers on the exchanges next year by leaving them with even fewer options and potentially higher prices. Humana told investors late Tuesday that it was abandoning exchanges in all 11 of its states as of the beginning of next year.
Humana, based in Louisville, Ky., was the only insurer on exchanges in 16 Tennessee counties, according to data compiled at the start of the 2017 open enrollment period. That means customers in those counties may have no way to buy coverage with help from government tax credits next year unless another insurer decides to enter those markets.
Every exchange in the U.S. had at least one insurer selling coverage on it for 2017, according to Larry Levitt of the nonprofit Kaiser Family Foundation, which studies health-care issues.
Morningstar insurance analyst Vishnu Lekraj said it’s possible all the four insurers involved in the deals could leave the exchanges.
Aetna Chairman and CEO Mark Bertolini raised that possibility months ago. He said that if his company’s planned merger was blocked, “we believe it is very likely that we would need to leave the public exchange business entirely,” according to court documents filed in that case.
Aetna, based in Hartford, Conn., says it lost $450 million last year on ACA-compliant coverage, while the company booked an overall profit of $2.27 billion. Its loss on ACA-compliant business was $100 million more than it expected.
Bertolini said recently that his company would announce by April 1 whether it will remain in any of its exchanges.
“We’re looking at everything,” he said.
Government and industry officials have said President Donald Trump’s administration and congressional Republicans are weighing measures to stabilize the wobbly exchanges.
“The clock is definitely ticking for the Trump administration to provide some clarity around what the rules will be,” Levitt said.