Aetna’s Credit Prospects Boosted After ACA Exchange Pullback
Aug. 23--Aetna Inc. has improved its credit prospects by leaving public health exchanges in hundreds of counties, Moody's Investors Service said Monday.
The ratings agency said Aetna's decision to sharply reduce its presence in the Affordable Care Act exchanges to 242 counties from 778 next year is "credit positive" because it reduces an "earnings drag from unprofitable products."
"Aetna's exit from these products in a large majority of its states reduces its exposure to what has become a poorly performing business for most health insurers," Moody's said.
Hartford-based Aetna said when it announced its decision last week that it took a second-quarter pretax loss of $200 million and total pretax losses of more than $430 million since 2014 in individual plans.
Aetna, the third-largest health insurer in the U.S., is the latest major carrier to announce a significant pullback from the public exchanges. UnitedHealth Group Inc. announced a similar move in April.
Moody's estimates that the private health insurance sector's losses from the exchanges exceeded $3 billion in 2014 and the financial results of most health insurers point to higher losses for the industry in 2015.
The loss of membership enrolled in the public exchanges will not "weigh heavily" on Aetna's business franchise or revenue, Moody's said.
Members on the exchange total about 800,000, or less than 4 percent of Aetna's total membership.
Moody's said it does not believe Aetna's exit from the exchanges will affect the legal battle over the attempt by the Department of Justice to block the insurer's proposed acquisition of Humana.
Aetna Chief Executive Mark Bertolini told the Justice Department in July that if the deal were blocked, the insurer would "need to take immediate actions to mitigate" losses in the public exchanges. Aetna will "immediately take action" to reduce its presence in health exchanges next year if the Department of Justice sued to block the deal, he said.
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