Thursday, May 11, 2017

Aetna out. Who’s still in? Anyone? Anyone?

Aetna blamed ‘marketplace structural issues’ that have led to health care co-op failures, exits by health insurers and a deteriorating risk pool leaving behind sicker, poorer people that lead to higher insurance rates.

It's not like Aetna hasn't been warning of doing exactly this, and for pretty much the same reasons, for months - many months, years even.   

As just one example of numerous media articles still on the web, here's an article more than a year old:

In this article, the author cites Aetna's view that State Obamacare Exchanges "set standard deductibles, copays and other benefits, forcing insurers to compete more directly on price".

So let’s follow the logic.

In order to compete on price, scale is essential. “Scale” is business shorthand that means reducing unit cost by spreading overall costs over a larger base.  Aetna needed a much larger base than its own individual policy enrollment in Obamacare Exchanges. To achieve such scale, Aetna went looking for a willing merger partner. That willing partner turned out to be Humana. When the government blocked that path there was no way forward for Aetna to achieve the scale it still believes it needs to compete on price. That is, without the additional Humana enrollment Aetna alone cannot grow in any market by enough to achieve the competitive pricing it needs. Worse, uncompetitive prices mean Aetna will inevitably lose the enrollment it has, losing gobs of money along the way, even in places where it may have earned small margins up to now.  Aetna has decided its only realistic alternative is to withdraw completely from Obamacare Exchanges.

BTW, Aetna’s current Obamacare Exchange enrollment is about 255,000, down from a peak of just under 1 million when Aetna participated in 15 States.  By contrast, Aetna reports total enrollment for medical coverage overall of just over 23 million Americans, virtually all group plans.

Also keep in mind this wider perspective: the essence of a functioning economy is the meeting of willing buyers and willing sellers. Under Obamacare, the government created unwilling sellers - Aetna is not the only insurer bailing out - and unwilling buyers, too.  The government has meanwhile done virtually nothing to address the underlying problem all along - the high cost of delivering medical care in the US.  How could the People of Smart like Jonathan Gruber, Ezekiel Emanuel, and The Fair Nancy Pelosi ever allow this to happen?

That's my story, and I'm stickin' to it.
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