Shareholders sue Aetna over retreat from ACA exchanges in 2016
Aetna’s 2016 decision to drastically scale back its participation on the Affordable Care Act’s insurance exchanges continues to haunt the insurer almost a year later.
Hartford, Conn.-based Aetna was hit with a shareholder lawsuit last week that accuses its board of directors of breaching its fiduciary duties to the company and its shareholders by making false statements about the insurer’s reasons for pulling out of exchanges in 11 states.
The Allegheny County Employees’ Retirement Fund—an Aetna stockholder—alleges that Aetna’s retreat from the exchanges was not a “business decision,” as the insurer claimed, but a move to better its chances of closing a $37 billion merger with Humana that ultimately failed.
The complaint, filed in Pennsylvania state court, says that Aetna’s alleged conduct, which came to light during its legal battle to acquire Humana, has caused the company financial harm and damaged its reputation. Moreover, the lawsuit claims that Aetna chose to forgo profits “simply to make good on their wrongful threats to the government.”
“The real reason that Aetna withdrew from the exchanges was to retaliate against the government for its attempt to block the Aetna-Humana merger and, moreover, the public exchanges in multiple states from which Aetna withdrew were actually profitable for the company,” the complaint states.
An Aetna spokeswoman declined to comment on the lawsuit. U.S. District Judge John Bates, who blocked Aetna’s merger with Humana in January, first made the accusation that Aetna used its participation on the exchanges as a form of leverage to close its merger.
He claimed in his written opinion that Aetna leadership made good on repeated threats to the U.S. Justice Department and then-HHS Secretary Sylvia Mathews Burwell to curtail its participation in the exchanges if the merger were blocked. The shareholder lawsuit filed this week cited Bates’ opinion as proof that Aetna misrepresented its reasons for exiting the ACA marketplaces.
In August 2016, Aetna said it would pull out of exchanges in 11 states and remain in just four states, forcing hundreds of thousands of plan members to find a new insurer. The company announced the decision just a month after the Justice Department sued to
In July, Aetna CEO Mark Bertolini wrote a letter to the Justice Department stating he would immediately reduce Aetna’s exchange footprint in 2017 and withdraw from at least five states or possibly the public exchange business altogether.
In August 2016, Aetna said it would pull out of exchanges in 11 states and remain in just four states, forcing hundreds of thousands of plan members to find a new insurer.
block its merger with insurer Humana. Aetna leadership said the move was purely a “business decision” made because the company was losing money on the plans.
At the time, Aetna’s retreat came as a surprise. The company just months before told investors it was on track to break even on the exchanges in 2016. But during the second quarter of 2016, Aetna announced it had lost $200 million from the plans and said it expected to incur a pre-tax loss of $350 million for the year.
Bates’ opinion laid out transcripts of emails, phone calls and depositions that he said showed Aetna’s decision was not based on financial losses.
For example, Aetna CEO Mark Bertolini told Burwell over the phone in June 2016 that were she to be contacted by the Justice Department regarding the merger, he would “appreciate a good word for all that we’ve done with you,” according to the opinion. In July, Bertolini wrote a letter to the Justice Department stating he would immediately reduce Aetna’s exchange footprint in 2017 and withdraw from at least five states, or possibly the public exchange business altogether, if the department sought to block the deal, court documents showed.
“The inescapable conclusion from these contemporaneous emails and documents is that the Aetna team making recommendations to Bertolini did not view withdrawing from the 17 complaint counties as a business decision,” Bates’ opinion stated.