- The Washington Times - Monday, August 15, 2016

In a major blow to Obamacare, one of America’s largest health insurers said it was pulling out of most of the markets in which it was participating, citing huge losses in the past quarter.

In a statement Monday, Aetna reported that it lost $200 million in the second quarter of 2016 and as a result would participate next year in just four states’ Obamacare marketplaces: Delaware, Iowa, Nebraska and Virginia.

Aetna had been offering health-insurance plans in 15 states’ Obamacare markets this year, but its retreat mirrors moves by several other major health-insurance providers in recent months.

“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 CEO Mark Bertolini said.

Some conservative critics of Obamacare, and even some liberal advocates who favored socialized medicine, predicted that private insurance companies would mitigate their exposure to a potential “death spiral.”

Under that scenario, as coverage protections kicked in, sicker patients would sign up and take advantage of taxpayer-funded subsidies to help them pay the premiums, yet healthier patients would figure it made more financial sense not to buy expensive plans but pay Obamacare’s newly mandated fines instead.

Insurers then would be forced to pay out more than they took in — and thus rethink their participation in the exchanges altogether.

Even President Obama has said with few private companies available in some places, the government should offer insurance directly itself — the so-called “public option.”

The Affordable Care Act ushered in a series of changes to the individual market. Most notably, insurers could no longer deny insurance to sicker customers. The law forced nearly all Americans to buy coverage, balancing out the insurers’ risk, though fines for flouting the “individual mandate” didn’t inflict much pain in Obamacare’s early rounds.

Obamacare marketplace CEO Kevin Counihan seemed to suggest Aetna was among insurers that struggled to adjust to new regulations that forced insurers to accept consumers of all kinds, rather than pursue profit.

“It’s no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality rather than by denying coverage to people with pre-existing conditions,” he said.

Mr. Counihan also downplayed Aetna’s move, saying Obamacare was still expanding and would continue to expand regardless.

“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 and every year after that,” he said.

Aetna initially planned to expand into more states for the 2017 plan year, but signaled a major U-turn earlier this month. Its decision to withdraw from the exchanges is sure to fuel Republican critics of Mr. Obama’s signature law, who say it is time to start over with “market-oriented” reforms.

They say the law is collapsing on itself, in part because of changes the GOP itself pushed to rein in a set of programs designed to mitigate against insurers’ losses in the first three years of Obamacare.

The health law requires the administration to make the full payments under the programs, but a spending deal that Congress struck at the tail end of 2014 mandated that the program be budget neutral, so lawmakers won’t be able to rescue insurers who expected payments from better performing plans as they try to get a handle on who’s signing up in the new marketplace.

As a result, analysts expect participating insurers to seek double-digit premium hikes in 2017 to cover higher-than-anticipated medical costs, while hoping the market stabilizes in the coming years.

Yet some insurers have run out of patience.

Like Aetna, UnitedHealth Group and Humana each plans to withdraw from all but a “handful” of the Obamacare exchanges in 2017, citing a costlier than hoped consumer base in the early rounds, leaving Anthem and Blue Cross/Blue Shield as the sole remaining major insurance providers in most Obamacare markets.

The administration remains bullish about the marketplace, however. Last week, it cited research that showed medical claims remained relatively constant in the individual market from 2014 to 2015, while costs increased by at least 3 percent in the broader market.

Administration officials took that as a sign that Obamacare’s risk pool would improve over time and that insurers may have underpriced their products in the early rounds, resulting in poor financial returns.

But the insurance industry’s top lobbying group said the study overlooked specific challenges at the local level and that many had gamed “special enrollment” periods that let customers sign up once they became sick.

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

• Tom Howell Jr. can be reached at thowell@washingtontimes.com.

• Victor Morton can be reached at vmorton@washingtontimes.com.

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