Does Aetna Exit Signal Deeper ACA Problems?

Aug. 17--The insurance giant Aetna will will stop offering Obamacare health plans in 11 of 15 states, citing $200 million in losses this year and more than $400 million since 2014.

The announcement, made Monday night, was the latest blow to the Affordable Care Act, which had already suffered the departure of top-five insurers Humana and UnitedHealthcare and has seen double-digit premium increases for many of the carriers that will continue to sell through health exchanges such as Covered California next year.

In general, carriers have said too many sick patients are the main reason they're dropping out of exchanges or raising rates. With not enough young and healthy enrollees to balance out the claims ledgers, the three companies that are pulling out or downscaling said they have lost hundreds of millions of dollars.

So do these developments mark the beginning of the doomsday scenario for Obamacare?

Before the law's main insurance provision took effect in 2014, many experts predicted that guaranteeing coverage to all consumers regardless of their pre-existing medical conditions would eventually create "sick" insurance risk pools that could not cover their costs without large premium increases each year.

Today, the experts disagree on whether the latest pullbacks and significant pricing hikes, floating in a sea of election-year politics, signal that the nation's health insurance exchanges have reached a terrible tipping point or are simply seeking a new state of equilibrium.

Gary Claxton, director of the nonprofit research group Health Care Marketplace Project at Kaiser Family Foundation, takes a middle position. He said the currently available facts can be interpreted either way, and that means Obamacare's upcoming open-enrollment period -- its fourth annual -- is critical.

It will all come down to whether the number of enrollees in Obamacare plans continues to grow, he said.

"We won't know until the next open enrollment, are we still moving forward or are we stalled or moving backward?" Claxton said. " If the market grows, then I think many insurers will find a way to be part of it ... The next couple of months are a moment of truth."

Just how bad the problem is depends on who you ask.

UnitedHealthcare said in April that it expects to lose $650 million this year because the cost of its Obamacare policies has exceeded revenue generated from premiums. Then late Monday brought Aetna's announcement of its deficits. While its book of business includes insurance plans sold outside of Obamacare exchanges as well, all plans on the individual market (not employer-based policies) have been affected by the Affordable Care Act's edict to take all comers regardless of their health status.

This picture of unprofitability from some of the nation's largest insurers contrasts with an announcement last week from the U.S. Centers for Medicare and Medicaid Services that said per-member claims were flat from 2014 to 2015 for exchange enrollees, compared with a 3 percent increase for the broader health insurance market.

The federal government gets its data from the Affordable Care Act's reinsurance and risk adjustment programs, which have collected broad information on all claims in order to reimburse programs that experienced higher-than-average patient expenses. The reinsurance program will go away next year and many organizations, including Covered California, have said insurers are announcing double-digit premium increases for next year to compensate for this change.

Neither the insurance companies nor CMS has released full data sets on Obamacare claims, making it difficult for analysts to reconcile these seemingly contrasting pictures about the financial state of health exchanges.

Brian Blase, a senior research fellow at the Mercatus Center, a conservative think tank located at George Mason University in Virginia, said he believes insurers' reported losses and their decisions to largely leave the exchanges have been brewing since 2014, the first year exchange policies took full effect.

A recent analysis of 174 health plans operating in 2014 showed that premiums would have had to be 24 percent higher than they were in 2014 to cover costs, but that the disparity was erased by the government's reinsurance program, according to the Mercatus study.

When asked why the recent CMS study indicates a very different scenario, Blase was blunt.

"I think they did some gymnastics on how they counted or discounted claims. It is inconsistent with everything else I've seen and, frankly, I think that their analysis is inaccurate," Blase said.

He said the current negative pattern will likely deepen, eventually leading to repeal or significant modification of the Affordable Care Act's insurance regulations.

"You're going to have rising premiums and lower choice. I think the political pressure next year to make changes will be significant," Blase said.

But others such as Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, a foundation that supports independent research on health care practice and policy, don't see dire signs from the latest insurance developments.

She noted that major carriers including Blue Cross, Blue Shield and Kaiser Permanente are not pulling out of exchanges.

There is evidence, Collins added, that insurance risk pools tend to be healthier when they're in larger states such as California. Long-term sustainability, especially where premiums are concerns, appears to be a function of size, which in turn lures multiple carriers who compete with each other for business.

Collins said this means the estimated 1,000 U.S. counties with only one insurance carrier are likely to see more significant upward pressure on premiums in coming years, a situation that does, as Blase asserts, seem to suggest the federal government needing to step in.

Ideas for intervention range from creating a "public option" similar to Medicare or special high-risk insurance pools to subsidize insurance who cover people with the most expensive medical needs.

Overall, though, Collins said the current information appears to indicate that Obamacare markets are maturing rather than dying.

"It's not surprising that we're seeing some shake-up in the marketplace this year. There are going to be winners and losers like any competitive market you can think of. Some will compete and gain market share, others won't," she said.

Additional information on the changes the Affordable Care Act has wrought in California will be forthcoming.

The Kaiser Family Foundation is scheduled to release the fourth and final installment of its California health survey on Friday. The survey has tracked the effects of the law across the state since summer 2013.

___

(c)2016 The San Diego Union-Tribune

Visit The San Diego Union-Tribune at www.sandiegouniontribune.com

Distributed by Tribune Content Agency, LLC.