Health insurer Aetna Inc. will stop selling individual Obamacare plans next year in 11 of the 15 states where it had been participating in the program, joining other major insurers that have pulled out of the government-run markets in the face of mounting losses.
Aetna will exit markets including North Carolina, Pennsylvania and Florida, and keep selling plans on state exchanges only in Iowa, Delaware, Nebraska and Virginia, according to a statement Monday evening. In most areas it’s exiting, Aetna will offer individual coverage outside of the program’s exchanges.
Aetna does not offer any polices on Maryland Health Connection, the state’s individual insurance exchange. Aetna does have small-group health insurance policies in Maryland, which are unaffected by Monday’s announcement. The decision is the latest blow to President Barack Obama’s signature domestic policy accomplishment. While the Affordable Care Act, known as Obamacare, has brought coverage to millions, the new markets have proven volatile for some of the largest for-profit insurers. Aetna said earlier this year that it expected to lose $300 million on the plans. UnitedHealth Group Inc. and Humana Inc., which Aetna has agreed to buy for $37 billion, are also pulling out after posting hundreds of millions of dollars of losses.
Aetna’s about-face on the ACA comes less than a month after the U.S. Justice Department sued to block the company’s plan to purchase Humana. The DOJ said the combination would harm competition for private Medicare plans and for ACA health plans. Aetna has said its revised stance on the ACA wasn’t prompted by the suit.
Next year will be Obamacare’s fourth of providing coverage in the new markets. Aetna’s decision doesn’t affect people covered by the company this year, but when they look for coverage next year, they’ll need to pick a new insurer. The decision, which affects about 80 percent of Aetna’s customers in individual ACA exchange plans, raises the prospect that some consumers will only have one insurer to choose from when they buy 2017 coverage.
“The vast majority of payers have experienced continued financial stress within their individual public exchange business,” Aetna Chief Executive Officer Mark Bertolini said in the statement. “Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool.”
Peter Costa, an analyst at Wells Fargo & Co., said the retreat is a smart financial move that could help avoid further losses.
“The exits are larger than we believe most expected, but we see this as a positive,” Costa, who rates the stock outperform, said in a note to investors. “We see the exits as the most predictably effective way to bring the book to break-even.”
Ana Gupte, an analyst at Leerink Partners, estimated that Aetna’s exits will boost next year’s earnings by about $200 million.
Aetna’s shares gained less than 1 percent to $120 at 8:48 a.m. in New York, before the markets opened. Through Monday, they had risen 10 percent, topping the 7.2 percent gain in the Standard & Poor’s 500 Index.
Here’s a full list of the states Aetna is exiting:
Arizona Kentucky Pennsylvania Florida Missouri South Carolina Georgia North Carolina Texas Illinois Ohio
Kevin Counihan, who oversees the ACA marketplaces at the federal Centers for Medicare and Medicaid Services, said in a statement that the Obamacare markets remain strong.
“Aetna’s decision to alter its marketplace participation does not change the fundamental fact that the Health Insurance Marketplace will continue to bring quality coverage to millions of Americans next year,” Counihan said.
Aetna covered about 838,000 people through the Obamacare exchange in its 15 states as of June 30, and on Aug. 2 said it was re-evaluating its approach to the market. At the time, the company said it was scrapping plans to expand into new states for 2017.
“We’ve got to be able to cover the costs associated with providing the care,” Aetna CEO Bertolini said in an interview at the time.
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.