Aetna’s extortion boosts urgency for ObamaCare public option

Here’s one figure to focus on when thinking about Aetna’s extortion of the federal government for the Justice Department (DOJ) decision to fight its merger with Humana: $1 billion. That’s the amount Aetna will owe Humana if the merger falls through. One billion dollars of health insurance premiums collected from businesses and individuals as part of Aetna’s drive to become a bigger near-monopoly and maximize profits. The impact on Americans’ access to health be damned.

{mosads}There’s a lot to be skeptical about in Aetna’s decision to abandon Affordable Care Act (ACA) markets in 11 of the 15 states it operates, three weeks after the DOJ action. But the bottom line is crystal clear: The ACA cannot rely on the private insurance industry for its operations. Which is why Democratic nominee Hillary Clinton is now calling for a national public option as a key part of her plan to strengthen the ACA.

On July 5, Aetna CEO Mark Bertolini threatened to “leave the public exchange business entirely” if DOJ opposed the merger with Humna. Two weeks later, DOJ stood up against Aetna’s extortion and sued to block the merger, along with another giant health insurance merger between Anthem and Cigna. Almost every health insurance market in the country is already highly concentrated by DOJ standards and concentration has only increased since the ACA’s passage. These two mega-mergers would have had cemented oligopoly power in private health insurance.

What is particularly suspicious about Aetna’s decision to leave many ACA markets is that it comes only three months after Bertolini gave investors a bullish report on its ACA exchange business, citing robust growth of enrollees and health costs within expectations. He bragged that the cost of acquiring new enrollees in the exchanges was low.

In its decision to withdraw, Aetna complained about the proportion of people enrolling who have high healthcare costs. But a report just released by the agency that regulates the ACA found that the per person cost of covering people in the ACA exchanges did not increase between 2014 and 2015, while costs in the employer market increased 3 percent per enrollee.

As Tim Jost explains in Health Affairs, premiums in the ACA exchanges are much lower than predicted, boosted in part by a government program to subsidize rates in the first few years. Insurers now need to make up for under-charging, but that will not have an impact on most people enrolled in the ACA: 86 percent of enrollees qualify for subsidies, limiting the amount they pay. With per-member healthcare costs stable and a growing customer base in the exchange market, Aetna was bullish until the DOJ threatened to stop the merger.

It doesn’t really matter why Aetna is playing games with the ACA. What matters is that millions of people are victims of the corporate priority of maximizing profit. With the Aetna withdrawal, there are between five to seven states where people will have only one insurer operating in the exchange. Southern states and rural areas are the most likely to have few, if any, choices. And as an Urban Institute study found, fewer choices means higher premiums.

As the proposed mega-mergers demonstrates, health insurance companies hate competition. That is why the industry vigorously opposed including the provision that was passed by the House of Representatives in 2009 to include a national, public health insurance plan in all exchanges.

The supporters of the public option warned that private insurance companies couldn’t be trusted to provide reliable coverage or control costs. The shrinking number of health insurers is proof that these warnings were spot-on.

We have also seen that the insurance plans offered in the exchanges control costs by limiting people’s choice of hospitals and doctors. People are forced to choose between lower premiums and questions about whether they can get the care they need, particularly if they have a chronic condition.

Offering a national public option is a way to solve all these problems. It would assure that there is a health insurance plan in every exchange. The plan would be modeled after Medicare, with negotiated rates accepted by almost every hospital and health care provider in the country. Those negotiated rates, like Medicare, will make it more successful at controlling healthcare costs than private insurance.

As I wrote two years ago in The Hill — and as Yale professor Jacob Hacker wrote recently — the best way to establish the public option would be to have Medicare operate in all exchanges. That would make far more sense than setting up an entire new health insurance plan. The version of Medicare for the exchanges would be somewhat different than Medicare for seniors and the disabled. Changes would include serving children; covering hospital, doctor and prescription drug costs in one plan; and meeting other operating rules of the ACA, like the ones that apply to out-of-pocket costs.

Hillary Clinton has laid out three simple goals for strengthening the ACA: make premiums more affordable; lower out-of-pocket costs, including making prescription drugs more affordable; and establishing a national public option. That’s a package that makes great sense. It’s the only real answer to Aetna’s extortion and a private health insurance industry that will always put profits before delivering affordable coverage to people or the nation.

Kirsch is the director of Our Story — The Hub for American Narratives and a senior fellow at the Roosevelt Institute.

The views expressed by contributors are their own and not the views of The Hill.