Aetna's pullback: Another blow to ACA

Aetna's announcement Monday that it will slash its participation in marketplaces set up by the Affordable Care Act is the latest distress signal by large health insurers.

Aetna's decision to end its participation in 11 public marketplaces, including Pennsylvania's, comes on the heels of an announcement by Anthem that, in a reversal of expectations, it was now projecting mid-single digit losses on the individual plans it sells on the exchanges. Humana said it would dial back its participation on the exchanges from 15 states to 11 earlier this month. UnitedHealth Group plans to remain on "three or fewer exchange markets," its chief executive Stephen Hemsley said on an earnings call in July. Cigna has said that it expects a loss on the exchanges, but the insurer is planning to expand its marketplace presence to three new states in 2017.

"As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision," Aetna chief executive Mark Bertolini said in a statement. "The vast majority of payers have experienced continued financial stress within their individual public exchange business due to these forces."

Bertolini said there were not enough healthy subscribers to offset the number of participants who require costly care. Aetna will still offer policies on four state exchanges.

Katherine Hempstead, a senior adviser at the Robert Wood Johnson Foundation, said that these national carriers have not traditionally been the biggest part of the exchanges and that, while choices and competition will diminish in certain parts of the country - she pointed to South Carolina and Arizona - she did not see this as a death knell for the exchanges.

"I think the market could survive without these guys," Hempstead said. "Obviously, it would be better to see lots of people seeing a lot of opportunity in this space. . . . But I don't think it's a chapter in a Greek tragedy."

The announcements also come as four of the major insurers are in a battle with the Obama administration. The Justice Department has moved to block two proposed mergers between Aetna and Humana and Anthem and Cigna; the companies are fighting the decision. Anthem has said that if its proposed deal with Cigna is allowed to go through, it will increase its exchange offerings to nine additional states.

Caroline Pearson, a senior vice president at Avalere, a health-care consulting firm, said that the lawsuit may have affected the timing of Aetna's announcement, but not the underlying facts about the viability of the marketplaces.

"Aetna may have been holding tight and keeping their mouth shut about how problematic the market is because they were sort of involved in the merger and waiting to hear" from the Justice Department, Pearson said. "But I think the facts in the exchanges are sufficiently dire that all the major carriers need to be assessing how they can be profitable or whether they can continue to participate."

One major issue is the risk pool - the balance of healthy and sick people who incur major medical costs. An analysis by the Centers for Medicare and Medicaid Services released last week showed that the medical costs of members on the exchanges each month had barely budged between 2014 and 2015, suggesting that the risk pool was not getting worse.

But Pearson said that was counter to what everyone expected; the people with the most medical issues were expected to sign up for insurance first. The idea was that the pool would become more balanced over the years as more healthy people signed up. That did not appear to happen. The CMS analysis was also quickly rebutted by insurers.

"This is an overly optimistic assessment of a market that continues to undergo significant changes for both consumers and health plans," Marilyn Tavenner, president of America's Health Insurance Plans, said in a statement. "The reality is that the risk pool has not significantly improved. That is a serious concern."