The real story behind the recent headlines that Obamacare is failing

CREDIT: AP PHOTO/JESSICA HILL
CREDIT: AP PHOTO/JESSICA HILL

A major insurance company announced this week that it will pull out of Obamacare, sparking a round of concerned headlines about the future of health care reform. But while Obamacare opponents are seizing on the news to argue the health law is failing, that’s not exactly the case. The details of the situation — and the motivations at play here — are much more complicated.

Insurance giant Aetna said it’s losing too much money and will withdraw its plans from about 70 percent of the counties where it currently sells them on Obamacare’s state-level marketplaces. Aetna is the third insurance company to pull back from Obamacare’s marketplaces, following similar decisions from UnitedHealth Group and Humana.

These companies argue they need to scale back because insuring the people who are selecting Obamacare plans is more costly than they expected. Too many sick people are buying plans, and not enough healthy people are making up the difference, according to the insurers.

It’s certainly true that some large insurance companies have been losing money on the marketplaces (and raising premium rates for their plans in order to compensate). And there’s broad agreement across health policy experts that there’s more work left to do to strengthen Obamacare’s marketplaces and continue attracting healthy consumers.

But according to reporting from the Huffington Post — which obtained a letter that Aetna sent to Department of Justice officials last month — that’s not exactly the whole story here. In fact, Aetna’s decision to withdraw from Obamacare was directly related to the Obama administration’s move to block a proposed merger between Aetna and Humana.

In the letter, Aetna CEO Mark Bertolini writes that he’s supportive of Obamacare’s effort to expand coverage and hopes to continue providing plans on its state-level marketplaces. But he also essentially threatens to withdraw from Obamacare if the Department of Justice chooses to block the lucrative merger — saying that his company would need to abruptly reverse course, shrinking its presence rather than expanding it.

“Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint,” Bertolini writes.

The DOJ did sue to stop the $37 billion merger from going through, citing concerns about less competition in the insurance industry that could ultimately drive up costs for American consumers.

When major insurance companies merge, research shows that tends to lead to fewer choices and higher premiums for the American public. Experts also worry about consolidating power among a few extremely wealthy insurance companies, which gives those companies even more leverage to pressure other players in the industry — like hospitals — to accept their prices. There’s some evidence that consolidation could even reduce the quality of health services that Americans receive.

The Huffington Post points out that Aetna’s stance on Obamacare shifted radically after the DOJ blocked the merger in July.

As recently as this spring, Bertolini defended the company’s decision to participate in Obamacare despite its initial financial losses, telling investors that the company expected the marketplaces to stabilize after the first few years of health care reform. Now, Aetna officials are reversing course — publicly maintaining that they can’t sustain these losses, with no mention of the thwarted merger as a factor in this change of heart.

The letter written to DOJ officials confirms some of the suspicions of Obamacare supporters, who pointed out earlier this week that Aetna’s timing seemed awfully convenient to them.

“You have to wonder, what is the real motivation?” Topher Spiro, the vice president for Health Policy at the Center for American Progress, who publicly criticized the proposed merger, told Politico. (Disclosure: ThinkProgress is an editorially independent site housed at the Center for American Progress.)

The Affordable Care Act, which has reshaped the insurance industry in significant ways over the past six years, hasn’t been a major talking point on the campaign trail so far this year — but the political rhetoric is probably about to heat up. Republicans were quick to jump on the news from Aetna this week.

“Aetna’s withdrawal from nearly a dozen exchanges is another sign that Obamacare is unsustainable,” FreedomWorks CEO Adam Brandon said in a statement. “Conservatives must demand that Republicans begin to make Obamacare an issue in this election and promote patient-centered solutions that will restore the American health care system.”

The health reform plans proposed by GOP lawmakers, however, have so far come up short. Republicans intent on repealing Obamacare have failed to coalesce around a specific set of policies to replace it — and House Republicans’ latest plan, released in June, is too thin on details to predict exactly how it would affect the American public.