Mark Bertolini, CEO of Aetna
It’s only Thursday, but it’s probably safe to announce that the winner of Healthcare Hypocrite of the Week is Aetna Chairman and CEO Mark Bertolini. And it’s not because Elizabeth Holmes and Martin Shkreli have managed to stay out of the news for a while.
Despite calling the Affordable Care Act business a “good investment” as recently as April, Bertolini has decided to pull Aetna out of most of the public health insurance exchanges. Initially, he cited the ACA risk pools as being unsustainable — in other words, too many old people with chronic illnesses and not enough young and spry customers to mitigate the risk. But as it turns out his actions may have been prompted by a desire to get even when the insurer didn’t get its way on a business deal.
On Monday, Aetna announced that it was pulling out of public individual insurance exchanges in all but four states. For the 2017 plan year, the Hartford, Connecticut-based insurer will only participate in the exchanges in 252 counties in Delaware, Iowa, Nebraska and Virginia. The reason? The company said it lost $200 million on individual plans in the second quarter and $430 million since the Obamacare insurance mandate took effect in 2014.
Aetna noted that more than 40 other health insurance companies have exited public exchanges in the last two years.
The news spread rapidly, with some speculating that it could be a potentially fatal blow to the Affordable Care Act’s health insurance mandate. Not surprisingly, conservative news outlets salivated. “Obamacare is perched on the edge of a death spiral,” crowed Reason.com managing editor Peter Suderman.
Republican presidential nominee Donald Trump also seized on the news of Aetna’s withdrawal from the exchanges. The Wall Street Journal reported that the Trump campaign said the company’s decision signified that “this broken law … is slowly imploding under its regulatory red tape.”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Aetna tried to be conciliatory in its announcement that it was departing the exchanges in 11 states — despite the fact that it left residents of rural Pinal County, Arizona, with zero options for individual coverage on Arizona’s public exchange.
Then, Tuesday, some liberals speculated that Hartford, Connecticut-based Aetna was hitting back at the administration because the U.S. Department of Justice sued last month to block the company’s proposed $37 billion merger with Humana.
“Aetna’s CEO had touted the ACA Marketplace as a good investment in April, which raises very serious concerns about Aetna’s sudden change of heart,” Rep. Frank Pallone (D-New Jersey) said, according to Politico.
“What they’re saying [about financial losses] doesn’t hold a lot of water,” Politico quoted Topher Spiro, of the leftist Center for American Progress, as saying. “So you have to wonder, what is the real motivation?”
In fact, in January, Bertolini had made even a stronger declaration in support of Obamacare and the exchanges.
“We believe it is incredibly important, in the business we’re in, that we insure all Americans,” Bertolini said then, according to Reuters. “We believe we have an obligation to stick it out and work with it until we know that it won’t work. And I believe it is too early to give up on this process.”
Which makes the sudden decision to pull out stand out like a sore thumb. Aetna, however, denied that it had a vengeful motive in all but abandoning the exchanges.
Then, early Wednesday morning, the company got caught lying in its denial. The Huffington Post unearthed a July 5 letter from Bertolini to the Justice Department, in which the Aetna CEO said:
Our analysis to date makes clear that if the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses. Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint. We currently plan, as part of our strategy following the acquisition, to expand from 15 states in 2016 to 20 states in 2017. However, if we are in the midst of litigation over the Humana transaction … we will not be able to expand to the five additional states. In addition, we would also withdraw from at least five additional states where generating a market return would take too long for us to justify, given the costs associated with a potential breakup of the transaction. In other words, instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states.
It sounded like strong-arm tactics at best, but the administration apparently wasn’t swayed. About two weeks later, on July 21, the Justice Department did in fact sue Aetna and Humana on antitrust grounds.
Aetna’s and CEO Bertolini’s hypocrisy notwithstanding, 2017 could be a challenging year for the ACA and the individual health insurance market. That’s because the Centers for Medicare and Medicaid Services-supported, transitional reinsurance program for individual risk pools is set to sunset at the end of this year.
Before the news of the July 5 letter broke, Bertolini said he regretted having to pull out and added that he was “encouraged” by an Aug. 11 Department of Health and Human Services statement that said HHS would look into modifying the ACA risk adjustments to offset the loss of the reinsurance program.
“We will continue to evaluate our participation in individual public exchanges while gaining additional insight from the counties where we will maintain our presence, and may expand our footprint in the future should there be meaningful exchange-related policy improvements,” Bertolini said on Monday.
It is now is pretty clear that Aetna’s chief executive was blowing smoke in public — even though some may find his concerns about the viability of the exchanges valid — while playing hardball in the shadows.
What is all the more galling is that CNBC reported Wednesday that Aetna was profitable in Pennsylvania last year, one of the states where it’s leaving the public exchange.
Overall, the insurer posted net income of $783.3 million for the second quarter, despite the losses of $200 million on ACA exchange business. That profit figure was up 8.4 percent from $722.1 million a year earlier.
Aetna did not respond to several requests for comment this week, including one after the July letter surfaced. Perhaps some people in Hartford are embarrassed by the boss’ hypocrisy.
