Health Insurer Aetna Backs Off ACA Expansion Plans
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HARTFORD, Conn. (AP) - Aetna is calling off its public insurance exchange expansion plans for next year, as it becomes the latest big insurer to cast doubt on the future of a key element of the Affordable Care Act.
The nation's third largest insurer said Tuesday that significant challenges faced by the state-based exchanges are forcing the company to withdraw expansion its plans and think about its future participation in the 15 states where it currently sells coverage.
Aetna was planning to expand to a few states like New Jersey and Indiana for 2017. The Hartford, Connecticut, insurer said earlier this year that it had lost more than $100 million on its exchange business last year, but company leaders said they thought the exchanges still might represent a good business opportunity.
Aetna covered about 911,000 people through the exchanges, a small slice of its customer base of nearly 23 million.
The exchanges have helped millions of people gain health coverage, many with assistance from income-based tax credits, but several prominent insurers say they are bleeding money on this business.
The nation's largest health insurer, UnitedHealth Group, has drastically cut its presence in the exchanges, and the Blue Cross-Blue Shield insurer Anthem also recently reported a loss from the still-new business. Health insurance cooperatives created to compete with established insurers on the exchanges also have floundered badly, with most folding after selling coverage for only a few years.
Companies say they have been struggling with higher-than-expected claims and a shortfall in government assistance, among other issues, since the exchanges opened for enrollment in the fall of 2013.
Aetna's announcement comes nearly two weeks after federal regulators said they were suing to stop the insurer's $34-billion acquisition of Humana, which provides Medicare Advantage coverage, a privately run version of the government's Medicare program for the elderly.
The Department of Justice also said it would sue to stop Anthem Inc.'s $48-billion acquisition of rival Cigna Corp., and Anthem said last week that that deal would help it stabilize its exchange business.
Both Anthem and Aetna have vowed to fight the government lawsuits in court. Aetna also said Tuesday that it and Humana have agreed to sell some of their Medicare Advantage business to another insurer, Molina Healthcare Inc., for around $117 million. The insurers say this deal should help alleviate regulator concerns that an Aetna-Humana combination would stifle competition in too many Medicare Advantage markets.
Aetna also reported on Tuesday a second-quarter performance that topped analyst expectations. The insurer earned $790.8 million in the quarter that ended June 30.
On a per-share basis, the Hartford, Connecticut-based company said it had profit of $2.23. Earnings, adjusted for one-time gains and costs, were $2.21 per share.
The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of $2.11 per share.
Aetna posted operating revenue, which excludes investment income, of about $15.9 billion in the period, also exceeding Street forecasts. Nine analysts surveyed by Zacks expected $15.74 billion.
The insurer also reaffirmed its forecast for full-year earnings in the range of $7.90 to $8.10 per share.
Aetna shares have risen almost 6 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 6 percent. The stock has increased slightly in the last 12 months.
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