Aetna Inc. CEO Mark Bertolini announced a projected pre-tax loss of $350 million on the Affordable Care Act state exchange business this year in the company’s quarterly earnings call last week. That figure represents a $50 million increase over loss estimates of $300 million earlier in the year.
The blue chip health insurance company currently has about 775,000 covered individuals on the state public health care exchanges representing about $2.7 billion or 70% of Aetna’s individual health plan business. Bertolini says that the company plans to decrease its ACA exchange footprint to as little as $1.3 billion or just 30% of its individual plans.
The company didn’t offer any estimates on the number of people it expects to enroll on the public exchanges in 2017, nor would it make any projections on ACA losses next year until actual enrollment figures come in. Bertolini again, “We made estimates off of the current book of business, which by the way turned over almost 55% this last year.”
As part of its plan to decrease its ACA footprint, Aetna says it will drastically decrease the number of states where it offers plans on the exchanges next year. It currently operates in 15 state exchanges, a number expected to drop to just four in 2017.
A Skewed Patient Population
The problem, according to Bertolini, rests on an unexpectedly older and chronically ill enrolled patient population and a risk adjustment mechanism that has failed to keep up with actual enrollment. The risk adjustments were centered on an “average” population, while those who eventually enrolled in the exchange plans skewed older and less healthy.
Bertolini described the pool as “largely people who are too young for Medicare, chronically ill and older,” a mix he estimates is between 10% and 15% below break-even point for Aetna’s exchange plans.
Industry analysts suggest this could be the beginning of the so-called “death spiral,” in which premiums skyrocket, driving out the healthier, lower risk individuals and losses continue to build, making the program untenable for private health insurers like Aetna over the long term.
Aetna closed at $112.77 on Monday, up $3.03.
Date: November 08, 2016