Aetna withdraws from state’s health insurance exchange

Aetna has withdrawn its proposal to participate in Connecticut’s health insurance exchange, becoming the second carrier in recent weeks to exit the new marketplace.

The Hartford-based insurer indicated it did not believe the price modifications requested by state regulators would allow it to bring in enough money in premiums.

“We have spent considerable time identifying those states in which we can be competitive and add the most value to the market,” Aetna spokeswoman Susan Millerick said in a statement Monday. “As a result of our analysis, we have reluctantly concluded that we will withdraw our Individual Exchange filings in Connecticut for 2014.”

“Unfortunately, we believe the modifications to the rates filed by Aetna will not allow us to collect enough premiums to cover the cost of the plans and meet the service expectations of our customers,” Millerick said.

Aetna also recently withdrew plans to offer coverage through exchanges in Maryland and Georgia. Aetna currently covers about 32,000 people through Connecticut’s individual insurance market, and plans to remain in the market outside the exchange.

Health insurance exchanges are new state-level marketplaces for individuals and small businesses to buy coverage as part of the federal health reform law. They will begin accepting enrollment Oct. 1 for health plans that take effect Jan. 1. Connecticut’s exchange is known as Access Health CT.

Aetna initially planned to offer coverage through Access Health for individuals — people who buy insurance on their own — but not for small groups. Millerick noted that Aetna’s proposal for individual-market rates was submitted before the insurer acquired Coventry Health Care, a Maryland-based company.

Aetna’s departure leaves three insurers with plans to offer coverage through Access Health’s individual market: ConnectiCare Benefits, newcomer HealthyCT, and Anthem Blue Cross and Blue Shield, the state’s largest insurer.

There are also three carriers expected to offer coverage through the small-group exchange: Anthem, HealthyCT and UnitedHealthcare. ConnectiCare Benefits withdrew its proposal last month, saying it wanted to focus on the individual market.

Even without Aetna, Access Health CEO Kevin Counihan said, consumers will have several choices. Aetna’s decision showed that the exchange and Connecticut Insurance Department had been rigorous in working to keep rates down, he added, noting that several other carriers have also reduced rates because of the review process.

As for Aetna, Counihan said, “I think that it represents a business decision by a major insurer that is taking a reasonably cautious, wait-and-see approach to entering exchange markets nationally.”

Access Health released a statement from Lt. Gov. Nancy Wyman, who leads the exchange board, minimizing the effect of Aetna’s departure.

“The bottom line is that this is a business decision by Aetna that changes nothing for Connecticut consumers and businesses,” she said. “People will still be able to choose from a very comprehensive range of quality, affordable coverage options offered through [Access Health CT].”

The insurance department must review all proposed rates for coverage offered through the exchange. It must determine whether the premiums charged will be enough to cover medical costs and ensure that they’re not excessive.

Correspondence between the insurance department and Aetna from last month reflects some disagreement about the way Aetna’s proposed rates were calculated. Insurance Department Actuary Paul Lombardo asked Aetna to reduce its projection of how much medical spending would increase from 10 percent to 8.5 percent, and asked the company to remove another assumption that would have raised rates.

A week later, Lombardo wrote to the company, “Please be advised that after further internal discussion, the Department stands by it’s original change request.” He asked Aetna to “make the appropriate revisions” and submit updated rates.

An actuarial firm working for Access Health, Wakely Consulting Group, also pointed to assumptions in Aetna’s rate proposals that stood out from the other insurers.

Aetna assumed that the health of the people covered by its plans through the exchange would be dramatically worse than what the other companies projected. Aetna’s calculation of how the health of the new customers would affect costs was 10 times greater than what Anthem projected, according to Wakely.

The company also included an 8.1 percent “durational adjustment” in its rate proposal, which Wakely’s analysis said was described as intended to affect the percentage of premium costs spent on medical care. Lombardo, the insurance department’s actuary, asked Aetna to remove it, saying the department wasn’t permitting that sort of adjustment in the first year of pricing for the exchange plans.

Unlike the other carriers, Aetna also included in its rate proposals an assumption that the newly insured would use more medical services to make up for years of going without care.

In addition, Aetna’s rate projections assumed that health care spending would rise by 10 percent, which the Wakely report said was at the top of the range used in rate filings for the individual market. And Wakely noted that it was higher than national projections about health care spending increases, which range from 2.8 percent to 7.9 percent. That projection in Aetna’s filing was one of the ones that Lombardo asked the company to reduce.

“Please be assured this is not a step taken lightly, and was made as part of national review of our Exchange strategy,” Aetna Senior Actuary Bruce T. Campbell wrote in a letter to the insurance department Friday. “We recognize there are many unknowns for all of us in this environment and we sincerely appreciate all of the hard work you and your team have put into making the Connecticut Exchange a success. We look forward to continuing to work together and will evaluate exchange participation in future years.”

Under the exchange’s rules, Aetna would have to wait until 2016 to sell plans through Access Health.

Counihan said health reform is disruptive to the insurance industry, and it’s not surprising that some carriers would choose to pull back from states’ exchanges. He noted that Aetna has a relatively small share of the individual-market business in Connecticut.

But Counihan added that there are also new insurers in the state, including HealthyCT, a nonprofit that was created with federal funds under a program created by the health reform law. Harvard Pilgrim Health Care, a Massachusetts company, is also planning to enter the Connecticut market.