Insurer exit darkens ObamaCare picture

Aetna’s decision to pull back from ObamaCare is fueling new questions about the long-term viability of the Affordable Care Act (ACA).

When UnitedHealthcare announced in April that it was leaving most ObamaCare marketplaces in 2017, supporters of the law argued against drawing broad conclusions, calling it one company’s decision.

{mosads}But since then two other large insurers, Humana and Aetna, have said they are slashing ObamaCare offerings due to heavy financial losses from the plans. 

With the success of the healthcare law predicated on participation from private insurers, the growing exodus is stoking alarm among healthcare experts — and cries of “I told you so” from Republican critics who have long called the law unworkable.

“It’s looking like the big, national insurers are having trouble turning a profit and competing in the ACA marketplaces,” said Larry Levitt, an expert on the healthcare law at the Kaiser Family Foundation. He noted that some other insurers with more experience serving low-income enrollees are faring better. 

Aetna late Monday said it plans to scale back its participation in ObamaCare. While the insurer is offering plans in 15 states this year, it will offer coverage in just four states in 2017.

“This is a business decision based on higher-than-projected medical costs that resulted in a second quarter pre-tax loss of $200 million, which we project will grow to in excess of $300 million by the end of 2016,” said Aetna spokesman TJ Crawford. 

Aetna is one of the largest insurers in the country, so the announcement amplified industry warnings that ObamaCare enrollees are sicker and costlier than expected. 

The next enrollment period for the law could be a turning point, experts say. 

If enrollment rises and brings an influx of young and healthy people, it could stabilize the marketplaces and change the financial picture for insurers. But if the marketplaces continue to serve a smaller, sicker group of people, urgent action may be needed.

“If enrollment next year stagnates, it will likely trigger a debate about how to fix the law, with big disagreement among Democrats and Republicans about what those fixes should be,” Levitt said.

Sabrina Corlette, an expert on the health law at Georgetown University, said the law is not in danger of melting down because of the way it is structured. She cited the financial subsides that the law gives lower-income people to pay for coverage. 

“Because of critical things like premium subsidies and the individual mandate, this is not a market that is going to crash and burn anytime soon,” she said.

But a thriving market for ObamaCare plans is not the same thing as a subsidized market for the poor and sick. Democrats had promised the former when pushing the healthcare law, not the latter. 

“I think there are going to need to be policy adjustments to make sure these markets are stable,” Corlette said.

Despite trouble in the marketplaces, ObamaCare has notched some significant successes. It has expanded coverage to 20 million people, cost less than originally projected and is credited by some with contributing to a slowdown in healthcare costs.

Experts say there are several changes to the law that would improve it substantially. Along with President Obama and Democratic presidential nominee Hillary Clinton, those experts have called for increasing the financial assistance under the law in order to entice more people to sign up. 

But Republicans in Congress are nearly certain to reject any new spending on the law. 

With no help coming from Capitol Hill, administration officials have sought to bolster the law through regulatory actions.

Officials moved to tighten up the sign-up rules for extra enrollment periods, for example. Insurers had complained that sick people were using the extra periods to game the system, driving up costs.

But while the Department of Health and Human Services is constantly in touch with major insurers on the marketplaces, Michael Adelberg, a former HHS official under President Obama now at FaegreBD, said there are limits to what officials can do on their own.

“At the end of an administration and after almost three years of red ink, a pep talk from a senior federal official might not a convince a CEO to hang in for another year,” Adelberg said. But he said policy changes HHS is taking on the extra enrollment periods and stepping up outreach to young people “ultimately matter more than a friendly call from D.C.”

HHS announced last month that it would be making changes to an ObamaCare program called risk adjustment, which shifts funds from insurers with healthier enrollees to those with sicker ones.

One insurance lobbyist predicted that there would be “intense lobbying” on those payments in the next few years.

Aetna, for example, has called the payments inadequate and pushed for them to become a direct subsidy from the government, rather than a program where insurers help each other. 

Creating a subsidy would likely require congressional action, however, and Republican lawmakers on Tuesday vowed they will reject any “bailouts” of insurance companies.

Sen. Ted Cruz (R-Texas) said in a statement that he “will stand with my colleagues and the American people to ensure that the federal government doesn’t give any more breaks to insurance companies and big healthcare interests at the expense of hardworking Americans.” 

Some Democratic health experts have expressed hope that Republicans will become more amenable to making fixes to ObamaCare if Clinton wins the White House.

“We do hear more and more from Republicans who recognize the ACA is here to stay, who are hearing from their own constituents of challenges, and who do want to solve them,” Neera Tanden, a longtime Clinton adviser and president of the Center for American Progress, said at a panel discussion last month at the Democratic National Convention.

“They’re not going to do it this year, but I do think if Hillary is elected, there are forces there who will know the ACA is not going away, and I hope we can actually move to a world in which we are not debating whether to have the ACA, but how to fix those problems and the challenges we face,” she added.

More immediately, though, Aetna’s decision poses a serious problem for ObamaCare enrollees in one county in Arizona, which now is slated to not have any insurers offering coverage under the health law next year. State and federal officials say they are looking for another insurer to fill the void.

In the long run, Corlette, the Georgetown professor, is holding out hope that Congress will focus on the plight of the uninsured.

“I refuse to believe there are politicians who will leave their constituents high and dry just to make a political point,” she said.