Share­hold­ers sue Aetna over re­treat from ACA ex­changes in 2016

Modern Healthcare - - NEWS - By Shelby Liv­ingston

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.

AP PHOTO

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