- Deal being killed would hurt finances, Aetna wrote in July
- Health insurer plans to pull out of most ACA market in 2017
Aetna Inc. warned U.S. officials more than a month ago that it would pull out of Obamacare’s government-run markets for health insurance if antitrust officials attempted to block its $37 billion merger with Humana Inc.
In a July 5 letter to the Justice Department from Chief Executive Officer Mark Bertolini, Aetna said that challenging the merger “would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support” of plans sold under the Affordable Care Act. That would leave the insurer “with no choice but to take actions to steward its financial health.”
On July 21, the Justice Department filed its suit to block the deal, as well as Anthem Inc.’s acquisition of Cigna Corp. On Monday, Aetna announced a broad pull-back from Obamacare’s exchanges, citing larger-than-expected losses on its individual plans this year.
The back-and-forth with U.S. antitrust officials that culminated in Aetna’s retreat is the latest turn in the volatile state of Obamacare’s “exchange” markets. They were set up for private insurers to sell coverage to millions of uninsured Americans. Aetna, which has said it expects to lose more than $300 million on exchanges this year, is not alone. UnitedHealth Group Inc. and Humana Inc. are both cutting their presence, saying they’re racking up hundreds of millions in losses. As a result, many regions or states have been left with just one insurer on the exchanges.
Bertolini sent the letter to the Justice Department in response to a civil investigative demand issued at the end of June. In the demand, signed by Assistant Attorney General Bill Baer, the U.S. asked Aetna for information on how the failure of the deal would affect Aetna’s “business strategy and operations,” including its participation in the exchanges.
Aetna said in an e-mailed statement Wednesday that its worsening finances -- not an attempt to retaliate because of the Justice Department lawsuit -- caused it to pull out of the Obamacare markets.
“That deterioration, and not the DOJ challenge to our Humana transaction, is ultimately what drove us to announce the narrowing of our public exchange presence for the 2017 plan year,” Aetna said.
The letter was first reported by the Huffington Post. Bloomberg obtained a copy from a person familiar with the matter, who provided it on condition of anonymity.
‘Immediately Take Action’
“If the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint,” Bertolini wrote. He said that the cost of litigation and debt taken on by Aetna, the need to plan for a breakup fee it would owe Humana, as well as cost savings from a successful deal, would all factor into Aetna’s need to pull back.
“By contrast, if the deal proceeds without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies (which are larger than we had planned for when announcing the deal) to supporting even more public exchange coverage,” Bertolini said in the letter.
The exits of Aetna, Humana and UnitedHealth from Affordable Care Act exchanges are limiting options for consumers and threatening to undermine one of the law’s key goals. Consumers in all or part of states including Georgia, North Carolina and South Carolina, may have only one insurer option when exchanges open for business next year. In one county in Arizona, there currently would be no insurers offering exchange plans.
The ACA relies on privately run insurers to offer health plans that individuals can buy, often with government subsidies. About 11.1 million people were signed up for Obamacare plans at the end of March.
The Aetna case is scheduled to go to trial on Dec. 5. Mark Abueg, a Justice Department spokesman, and Benjamin Wakana at the Department of Health and Human Services, both declined to comment