One of the many “rules” of one of my favorite TV characters, Leroy Jethro Gibbs of "NCIS," is that “there is no such thing as a coincidence.”
That “rule” comes to mind when I consider the timing of Humana’s announcement that it would pull out of a several Affordable Care Act exchanges and Aetna’s abrupt shift in its view of the marketplaces. After all, both came not long after the Justice Department’s decision to challenge Aetna’s acquisition of Humana.
Now, to be clear, I don’t quite agree that there is direct correlation between the exchange pullbacks and the antitrust suit, as implied by an article from the Motley Fool, which argues that Humana’s move is meant to “punish” the DOJ for its legal challenge.
As tempting as it is to draw that conclusion, Humana has said since May that it wants to curtail its losses in the individual market through "certain statewide market and product exits both on and off exchange.” Humana confirmed in its earnings report last week that its individual commercial offerings will cover no more than 156 counties in 2017, down from 1,351 counties in 2016.
That said, you could make a stronger argument for the political motivation behind Aetna suddenly saying it will scrap its plans to expand its exchange presence in 2017. Sure, CEO Mark Bertolini has $300 million in projected 2016 exchange-business losses to justify the decision. But you can’t ignore the fact that he has gone from saying in January that “we believe we have an obligation to stick it out” on the exchanges, to saying this past week that “we believe it is only prudent to reassess our level of participation on the public exchanges.” In the time between those two statements, the feds decided to challenge Aetna's merger.
To be fair, Bertolini has often tempered his support of the exchanges with suggestions for how they could improve. In fact, his remark on the Aetna's Q1 earnings call that “we continue to have serious concerns about the sustainability of the public exchanges” prompted a worried Health and Human Services Secretary Sylvia Mathews Burwell to call him to ask why he was suddenly taking a less-optimistic tone. (At the time, he assured her that his overall point was that Aetna supports the ACA exchanges but wants to see some changes.)
That exchange, though, speaks to the disconcerting political power that insurance executives like Bertolini wield in this new era of healthcare reform.
Just ask Anthem CEO Joseph Swedish. After the DOJ challenged the company’s acquisition of Cigna, he said in no uncertain terms that if the deal is allowed to proceed, the combined company will expand its exchange presence as well as “help stabilize pricing in this volatile market.” The takeway: Scratch our back, federal government, and we’ll scratch yours.
A healthy push-pull between private insurers and federal regulators is nothing new. But combine ACA marketplaces that are beholden to private insurer participation with antitrust litigation against some of those marketplace participants, and you practically invite company leaders to leverage one to influence the outcome of the other.
There are also no real winners in this situation. If the government successfully blocks both insurer deals, it still will have to grapple with dwindling competition in the ACA marketplaces. And if by some miracle one insurer merger closes, it will likely be Aetna-Humana--a combined company that will have every reason to continue to pare down its individual market offerings and focus on the lucrative Medicare Advantage sector.
It is difficult to predict what will transpire with the ACA exchanges, given the plethora of moving pieces, and the antitrust trials against the insurer mergers haven’t even started yet. But however both situations play out, the insurers’ response to the DOJ’s challenge of their deals has revealed their ability--and willingness--to poke the government’s weak spots on the ACA.
And when big companies get to call the shots, not the government institutions they are supposed to answer to, the system simply isn't working.