While Aetna is still smarting from its losses in the individual markets under the Affordable Care Act, the company’s chief executive is optimistic that the new administration can right the ship with the aid of industry input.
“In spite of the best intentions of Washington and industry, the intended goals of the ACA have not been achieved,” Aetna CEO Mark Bertolini said during the company’s fourth-quarter conference call with investors Tuesday.
Millions remain uninsured, and companies including Aetna have “collectively lost billions of dollars” in the individual markets, forcing many to either scale back their participation or exit completely, he said. As the public exchanges enter their fourth year, Bertolini added, the risk pools in the individual markets will likely continue to deteriorate absent a significant shift in regulatory policy.
Further, “we have no intention of being in the market for 2018,” Bertolini said later in the call. Like other insurers, Aetna would have to have its pricing and participation figured out by April, and that would be impossible to do given the regulatory uncertainty ushered in with the new administration.
Indeed, while Republican leaders have promised to provide a smooth transition while repealing and replacing the ACA, recent moves by the Trump administration—including pulling back open enrollment ads—is likely to compound insurers’ uncertainty.
Still, Bertolini is optimistic about the prospects for a new iteration of the individual markets.
“As we see the evolution of the next step of health reform, there is an opportunity for a retail market that is much more stable than the ACA has been,” he said.
To that end, he said Aetna is among those engaged in constructive dialogue with policymakers and regulators with the aim of keeping the parts of the ACA that worked while also “developing consumer-based approaches that deliver access to affordable, quality healthcare to all Americans.”
Bertolini’s comments echo those of UnitedHealth Group CEO Stephen Hemsley, who said on the company’s recent fourth-quarter earnings call that “we see the opportunity for robust, state-based healthcare markets” under the new administration. United was the first major insurer to pull out of the most ACA exchange markets in 2017, followed later by Aetna. Before that move by Aetna, however, Bertolini had argued that it was too soon to give up on the exchanges, saying "we believe we have an obligation to stick it out."
Aetna’s pre-tax operating losses in its individual ACA-compliant products reached $450 million last year, Chief Financial Officer Shawn Guertin said during the call. Overall, the insurer reported net income of $139 million, or $0.39 per share in the fourth quarter of 2016, and full-year net income of $2.3 billion, or $6.41 per share. Its operating earnings for fourth-quarter 2016 were $578 million, or $1.63 per share, and its 2016 operating earnings were $2.9 billion, or $8.23 per share.
Aetna still considering options for Humana merger
Bertolini made it clear on the call with investors Tuesday that Aetna is still deciding whether to appeal a federal judge’s recent ruling to block its acquisition of Humana.
“Given the clear benefits of combining these two great companies, we are conducting a thorough review of the court’s opinion and considering our options for responding to this ruling, including an appeal,” he said.
Aetna expects to complete its review and announce a decision before the Feb. 15 end date of its merger agreement, he added.
Later in the call, an analyst asked Bertolini about whether the court’s decision indicated the Justice Department is taking a tougher stance on the ability of divestitures to remedy antitrust concerns. Aetna and Humana had planned to divest some Medicare Advantage assets to Molina to win approval for the merger.
“The DOJ is looking for sustainable competition,” Bertolini said, adding that regulators are concerned with whether divested assets will have the necessary management teams and infrastructure to compete in competitive retail markets.