Unlike UnitedHealth, Aetna, Anthem say they will stay in ACA exchanges

Washington –UnitedHealth may quit the nation’s insurance exchanges, but Aetna and Anthem say they are staying and will work on problems with the marketplaces.

The largest U.S. insurer by market value, UnitedHealth said this week it expects to lose as much as $500 million selling coverage under the Affordable Care Act next year.

It said it is likely to leave state exchanges in 2017 if it can’t turn a profit.

That focused attention on the other, larger players in the Affordable Care Act marketplaces where millions of Americans purchase insurance — Anthem and Aetna.

UnitedHealth sells fewer policies on state exchanges than Anthem or Aetna. In Connecticut, UnitedHealth sold only about 2 percent of the policies purchased on the state’s exchange this year.

Anthem Blue Cross Blue Shield participates in 14 state exchanges.

Joseph Swedish, Anthem president and CEO, said his company has offered more than 1,000 new insurance products in those states, “more than any other healthcare insurer.”

“As a leader during this time of unprecedented transformation in healthcare, Anthem remains committed to enhancing access to high quality, affordable healthcare for all of our members inside and outside of the insurance exchanges and continuing our dialogue with policymakers and regulators regarding how we can improve the stability of the individual market,” Swedish said.

If a planned merger with Cigna goes through, Anthem could extend its reach into a few more markets, but Cigna is not a big player in the exchanges.

Despite Swedish’s commitment to the ACA, Rep. Darrell Issa, R-Calif., a leading Obamacare foe, predicted, “if United Healthcare pulls out, the Blues won’t be far behind.”

Aetna CEO Mark Bertolini said on an Oct. 29 conference call to investors that “it’s way too early to call it quits on the ACA and on the exchanges.”

“We view it still as a big opportunity,” Bertolini said.

Aetna offers policies in 17 exchanges, a number that could grow if it completes a planned merger with Humana.

Aetna is losing money on that business, company CFO Shawn Guertin said at a Credit Suisse health care conference earlier this year.

“The exchange business is unprofitable,’”Guertin said.

But, he added, “I do think we can make an improvement in the business.”

He said Aetna was hindered when it priced its exchange policies because “we did not have a shred of data” on risk factors for their new policyholders.

“We know a lot more today about this business,” he said, “pushing rate increases in the low teens” for exchange policies.

He also said Aetna “has made some decision about not participating in certain markets.”

Aetna does not sell policies in Connecticut’s marketplace, Access Health CT, although it once considered doing so. The company is exiting the Utah and Kansas exchanges this year.

“I do think we can make inroads in this business in 2016,” Guertin said.

UnitedHealth’s announcement about the ACA exchanges was surprising because, as recently as a month ago, the company was touting future growth prospects for that business. What happened?

Bill Melville, a senior analyst at Decision Resources Group, which focuses on ACA exchanges, said the failure of insurance co-operatives — non profit providers of heath care coverage usually owned by a group of doctors, hospitals and business owners — spawned a “churning” in the health care marketplaces.

That’s because the shutdown of those co-ops in several states, the most recent being New York, has put hundreds of thousands of people back on those marketplaces looking for new policies, and “there’s a concern they are sicker and older,” Melville said.

On the other hand, he said, young healthy people, the so-called “invincibles” are not signing up for health care in the exchanges at the rates insurers had hoped.

For now, the ACA looks secure, but the departure of another big insurer from the marketplaces could mean real trouble, he said.

“As much as people have been in an uproar over UnitedHealth, Anthem would be a much bigger canary in the coal mine,” Melville said.

Hours after UnitedHealth issued its statement about the exchanges this week, the Centers for Medicaid & Medicare Services issued a memo saying it would seek additional money to shore up a program that aims to reduce the risk insurers face setting premiums in the new and unfamiliar market of the exchanges.

“In the event of a shortfall for the 2016 program year, the Department of Health and Human Services (HHS) will explore other sources of funding for risk corridors payments, subject to the availability of appropriations,” the memo said. “This includes working with Congress on the necessary funding for outstanding risk corridors payments.

The risk corridor program works by comparing each insurer’s “allowable costs”—claims plus other allowable expenses — with the insurer’s “target amount” — determined through a formula that subtracts administrative expenses from premiums collected.

If an insurer’s target amount exceeds its allowable costs by more than a certain percentage, it pays into the program. If an insurer’s allowable costs exceed its target amount by more than a certain percentage, the insurer can collect from the program.

CMS announced earlier this year that insurers have submitted $2.87 billion in risk corridor claims for 2014, while owing only $362 million in risk corridor contributions. So payments to insurers who have suffered in the market will be cut, unless CMS finds more money for the program.

The failures of health insurance co-ops across the nation has been attributed, at least in part, to the reduced risk corridor payments.

“We’ve been very clear with the administration about the serious challenges facing consumers and health plans in this exchange market,” said America’s Health Insurance Plans President and CEO Marilyn Tavenner. “Most recently, nearly 800,000 Americans have faced coverage disruptions as a result of the significant and unexpected shortfall with the risk corridors program. When health plans cannot rely on the government to meet its obligations, individuals and families are harmed as a result.”