Aetna is the latest major insurer to pull back on the exchanges.
Aetna’s announcement comes after UnitedHealth said in April it would be cutting its marketplace involvement significantly, and Humana has also signaled a retreat from ACA exchanges. All three decisions have prompted Republicans to declare that Obamacare is failing and that they were right all along. But experts say some of the criticisms miss the nuance on what is actually driving the cutbacks.
“It’s not a statement that the marketplaces can’t work or that they aren't working," Linda Blumberg, a healthcare policy fellow at the Urban Institute, told TPM. "It’s a statement that these insurers are by and large not terribly competitive the way they came in, and if they are going to make money in this market they're going to have restructure and re-orient to the characteristics of what the consumers want.”
A letter obtained by Huffington Post from Aetna's CEO to the Department of Justice suggested that the agency's move to later block its proposed merger with Humana also played a role in the insurer's decision to scale back.
Aetna’s departure from the exchanges will mean less options for some consumers, particularly in rural areas.
For consumers on the ground, Aetna’s decision is most likely to be felt in the rural areas that have offered only one or no other carriers. It’s worth noting that the lack of competition among insurers existed in rural areas before Obamacare was passed.
"That has been an issue even prior to the Affordable Care Act, but the Affordable Care hasn't solved the problems in some of these less populated areas,” Blumberg said.
Arizona looks like it will be particularly hard hit, when Aetna's decision is coupled with other insurers' moves to scale back in the state, and at least one Arizona county looks like it won't have any insurers on its exchanges unless officials can convince another carrier to participate. Elsewhere, low-competition marketplaces will have even less options for consumers.
“What we’re seeing with Aetna's exiting is that this is pushing a couple of states in the category of just having one insurer,” said Cynthia Cox, the associate director for the Program for the Study of Health Reform and Private Insurance at the Kaiser Family Foundation. She pointed specifically to large swaths of North Carolina and South Carolina.
Aetna and other big insurers have struggled to cover sicker-than-expected populations on the exchanges.
Aside from the effect Aetna's departure have on consumers, the financial losses it and other insurers have experienced on the exchanges are worth noting, said Caroline Pearson, senior vice president at the health care consultancy Avalere Health.
“The combination of Aetna, Humana and UnitedHealth, along with some other smaller carriers, withdrawing from the market I think sends a clear signal about the magnitude of challenges facing the exchanges,” Pearson told TPM.
Their problems have been driven by a risk pool that is sicker than expected, which Pearson blamed on low enrollment. The premiums insurers are taking in aren’t enough to cover their customers' health care costs. Aetna said Monday it’s lost $430 million on the individual marketplace since it opened up business on the exchanges.
Some analysts say that this is the result of insurers pricing their premiums too low when they initially entered the marketplaces. It is expected that consumers will see a major premium hike in the open enrollment period this fall, though federal subsidies will blunt the sticker shock for many customers.
“The biggest issues is that a lot of companies priced their plans too low, and the premiums are too low to cover the costs,” Cox said.
There is much to be learned from the insurers that have decided to stay in the exchanges.
Not every carrier is struggling on the exchanges, and consumers’ willingness to shop around for deals has benefited insurers that offer plans that are on the cheaper end.
“There are insurance companies that are doing well and those are companies that have experience serving a low-income population,” Cox said.
Many of those carriers offer plans with narrow provider networks, while big insurers like Aetna and UnitedHealth have tended towards broader provider plans, which offer consumers more choices but at a higher cost.
“What consumers are showing time and again on these marketplaces is that they are very willing to trade a broad choice of providers for a low price, and the carriers that figured that out early are the ones that seem to be doing well,” said Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University's Health Policy Institute.
There is the possibility that the big insurers who are now pulling back will re-enter the marketplaces once they're better equipped to meet its demands. UnitedHealth, for instance, kept its new, more boutique-style subsidiary, Harken Health in the Indiana and Georgia exchanges where the insurer was otherwise withdrawing. It has signaled it could expand Harken Health to Florida.
"I would expect that, in a lot of those areas, they'll come back in. But they'll come back in with different looking products that are more similar to the ones that are competing well,” Blumberg said.
The hyper-partisan atmosphere around Obamacare isn't helping insurers.
This is not the first time a major piece of legislation caused instability in the industry it was reforming, but when it comes to past major overhauls, lawmakers have been able to come back to tweak the law as issues were identified.
This has largely not been the case for Obamacare, where six years after its passage, Republicans have insisted on nothing short but full repeal in a series of show votes and campaign promises. Many Democrats, meanwhile, have been hesitant to raise concerns about any of the law’s shortcomings for fear of opening it up to GOP attempts to gut it.
Pearson said that, even as insurers can be expected to recalibrate their plans, some fixes to the law are needed.
“Do I think things are going to collapse this year? No. But I think even with refinement to the health plans’ strategy, we’re probably going to need to see a major exchange stabilization next year through Congress,” Pearson said.
Advisors for Hillary Clinton’s campaign have said they’re optimistic that, if she wins, she'd be able to get GOP lawmakers to the table to improve the ACA, but Republicans have remained steadfast in their commitment to repealing Obamacare.
“Some of those tweaks might be able to be made through administrative action, but others might require legislative action, which is difficult in this political environment,” Cox said.
Update: This story has been updated to include reporting of a letter Aetna said to the Department of Justice in July.