Insurers
Show Their True Colors
By Phil Mattera in the Dirt Diggers Digest
One of the key building blocks of the Affordable
Care Act was the notion that insurance companies would compete with one another
to offer good deals to the uninsured once that population was required to
purchase coverage. That captive market is not working out as well as hoped.
Just the other day, Aetna became the last of the
five major national carriers to project a loss on ACA business for 2016 while
announcing the cancellation of a planned expansion of its participation in the
ACA state exchanges and a reevaluation of its current involvement.
This came in the wake of recent news that
UnitedHealth and Humana would also be cutting back on their exchange offerings.
These carriers attributed their moves to higher than expected medical costs among exchange participants. For all the talk about a reformed health insurance industry, the companies still operate according to a perverse dynamic.
They make money when more people don’t seek
healthcare services. The insurers can’t get away with many of the tricks they
used in the past to deny coverage, but they can still walk away from certain
market segments such as ACA plans when profits are not as high as they would
like.
The steps by Aetna and the others will intensify
what is already a dwindling amount of competition in some of the state
exchanges. Several are in a situation in which only one insurer is expected to
offer marketplace plans. The result is a kind of single payer situation, though
not in the good sense.
All of this is happening while the major insurers
have been trying to diminish competition in another way — by trying to merge
with one another. Aetna has been seeking to acquire Humana, and Anthem wants to
join forces with Cigna. The two proposed deals, totaling about $85 billion,
would reduce the number of major players to three.
Last month, the Justice Department and multiple
states filed
challenges to the two proposed mergers. It is unclear to what extent Aetna’s
announcement about a pullback in the exchanges is meant to put pressure on the
Obama Administration to back off from its opposition to the Humana deal.
What is clear is that Aetna has a long history of using
hard-ball tactics dating back to its purchase of the notorious HMO U.S.
Healthcare two decades ago.
Aetna tried to apply some of the worst features of
managed care — including bare-bones policies — to its health insurance business
and ended up with a wave of litigation and regulatory violations.
An attempt by
plaintiff lawyers to bring a massive tobacco-industry-type case against the
industry failed, but Aetna did have to pay $470 million to settle a
class-action suit brought by physicians over inadequate payments.
Aetna’s track record was one of the main pieces of
evidence showing the folly of the decision by the Obama Administration and
Congressional Democrats to shun single payer (or even the public option) and
embrace the big insurers.
That Faustian choice is coming back to haunt the
Dems, who are now trying to resurrect the public option. It may be too late.
