Last Minute Escape from Exchanges for Major Insurers

With one month left before Obamacare health plans flood the insurance market via state exchanges, top companies are backing out of the new arrangement. United, Blue Cross, Aetna and Humana have each decided against participating in the government-run marketplace, in a complete 180 from the past year of planning to sell plans on the exchange.

While at first glance it looks like an attempt to team up and save the future of private insurance, the motive behind this decision is that of disagreement with the insurance department. Aetna’s proposed premiums rates for exchange plans were questioned by regulators, and the insurer who has warned of the rate shock phenomenon may not have wanted to bargain any lower.

Aetna’s lead actuary, Bruce Campbell, claimed they “reluctantly” left their home state’s exchange in a letter to the Connecticut Insurance Department. Campbell noted, “Please be assured this is not a step taken lightly, and was made as part of national review of our Exchange strategy.”

In Maryland, Aetna said the state’s rate requirements would not be in the company’s best interests: earnings. Their statement to this state’s insurance commissioner said, “Unfortunately, we believe the modifications to the rates filed by Aetna and Coventry would not allow us to collect enough premiums to cover the cost of the plans.” With eight remaining carriers on the exchange, Maryland’s marketplace will not be at a loss.

Aetna also decided to back down from marketplaces in Ohio, California, Georgia, Maryland, Tennessee, New York and Texas. Their initial plan was to join the new wave of health insurance, offering products under their own brand name, and Aetna-owned Coventry in many states. Coventry will sell plans on the exchange in Ohio, and Aetna plans to sell its private health insurance products apart from exchanges for 2014, at least.

“We have spent considerable time identifying those states in which we can be competitive and add the most value to the market,” Aetna reported in a statement. “As a result of our analysis, we have reluctantly concluded that we will withdraw certain Individual Exchange filings for 2014, including filings in Connecticut, Georgia and Maryland.”

While Aetna and United Health Group never planned to join the marketplace in California, one of the state’s most popular insurers, Anthem Blue Cross of California, has withdrawn its bid. Insurers may win in this case by potentially keeping their business, but the Covered California consumer will receive far fewer options than if United decided to offer their 4,700-hospital network to residents of the most populous state.

The absence of large, premium-hungry health plans may not have such dire consequences, however, as the insurers who are offering coverage on California’s exchange are smaller, serving as a more community-centered option. “In many ways, their participation fulfills the promise of reform,” says Micah Weinberg of the Bay Area Council.

Aetna is leaving California completely, even the private individual market after this year, leaving an approximate 50,000 plan members to find new coverage by January.

Larry Levitt of the Kaiser Family Foundation notes that the competition is healthy and indicates the Affordable Care Act’s insurance reform is working. “You hear about major insurers exiting the market, and you think that must be bad for consumers and competition, but in some ways, it’s a sign that the competition is actually working. In a very price-competitive market, you would expect players to exit if they can’t compete.”

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