Humana to exit ACA exchanges

Dive Brief:

  • Humana will not be offering health plans on the ACA exchanges for the 2018 coverage year. 
  • The health insurance company, which substantially scaled back its ACA participation in 2016, said it is "seeing further signs of an unbalanced risk pool," as Republican lawmakers continue their plans for repealing and replacing the federal healthcare law.
  • Its financial guidance for the year was given on the same day it came to a mutual agreement with Aetna to end their plans for a $37 billion merger, following a court ruling that blocked the deal, mainly due to concerns with competition in the Medicare Advantage (MA) market. 

Dive Insight:

Coming out of the Aetna-Humana breakup, announced on Tuesday morning, Humana CEO and President Bruce D. Broussard told investors the company has the financial stability to return cash to shareholders and it will continue to pursue acquisition opportunities. Yet it will direct its attention to different types of deals with healthcare companies with goals like advancing the care experience and making access to care more convenient. For example, it seeks to increase its health IT portfolio with additional partnerships and expand its primary clinics. 

Humana's individual commercial membership was 204,000 as of this January, 152,000 of which were enrolled in ACA-compliant plans, Forbes reports. In 2016, Humana announced it would limit offering individual insurance plans to "no more than 156 counties" – a reduction of 1,195 counties on and off the ACA marketplace – after it stopped selling these plans in at least four states. Though Humana has not been a big player in the ACA market, as noted by Larry Levitt of the Kaiser Family Foundation in a tweet, it is not the only health insurance giant that has been significantly reducing its participation in the ACA exchanges.

While battling in court to finalize its failed merger, publicly disclosed documents revealed that Aetna had use its threat to pull out of ACA markets as leverage to pressure the government to approve the deal. Aetna exited nearly 70% of the ACA markets for the 2017 coverage year – from 778 counties to just 242. However, it left some profitable areas while staying in others that were unprofitable, argues a class action lawsuit Aetna's shareholders filed against the payer last month. On Wednesday, Aetna CEO Mark Bertolini said the individual exchanges are in a "death spiral" as healthier consumers are being priced out due to higher premiums, leaving insurers to cover sicker individuals that cause prices to increase even more, Reuters reports. UnitedHealth Group is one other major insurer that has reduced its ACA offerings. 

Large health insurers have cited financial losses on the ACA market as the reason for their exits. Humana said it stands to lose even more money than it has before if it were to continue on the exchanges next year. However, Public Citizen reported that the five largest insurers in the U.S. remained highly profitable post-ACA. Aetna, Anthem, Cigna, Humana, and UnitedHealth have collectively profited more than $65.5 billion since its implementation. 

Changes to the ACA proposed by the Trump administration reportedly aim to encourage insurers' ACA participation as they address at least some of their concerns. These include increasing the maximum age band ratio from 3:1 to 3.49:1, placing further restrictions on extended enrollment and allowing insurers to end coverage for non-payment after 30 days compared to 90 days. 

The federal government proposed a rule on Wednesday aimed at stabilizing the individual and small health insurance markets with changes that would expand pre-enrollment verification, allow insurers to offer more coverage options, shorten the open enrollment period in the individual market, etc. 

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Filed Under: Payer Finance Policy & Regulation
Top image credit: Dollar Photo Club