Aetna CEO on Obamacare: 'It is in a death spiral'

The CEO of Aetna, Mark Bertolini, says Obamacare is in a “death spiral.” Bertolini was speaking at an event hosted by the Wall Street Journal Wednesday. Asked about the future of Obamacare, Bertolini replied, “I think you will see a lot more withdrawals this year of plans.” Humana announced yesterday, shortly after its proposed merger with Aetna collapsed, that it was pulling out from its remaining Obamacare business in 2018.

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“We’re in Nebraska. We’re the only plan left in Nebraska,” Bertolini said. He added, “So there isn’t any risk sharing going on in Nebraska. It’s all the risk. It will cost us a lot of money. The top 1 percent to 5 percent of our members, depending on the marketplace, are driving 50 percent of our overall cost structure.” Bertolini went on to say, “There isn’t enough money in the ACA today as a structure, even with it’s fees and taxes, to support the population that needs to be served.”

Asked if this meant Obamacare was “functionally” dead, Bertolini replied, “It is in a death spiral.” “What happens in a population that continues to get riskier and riskier is the rates chase the risk, you try to raise your rates high enough,” he continued. “Last year it was on average 27 percent. What happens is the people who are paying out of pocket for most of it leave because it is becoming too expensive,” he said.

Asked about the how it might end Bertolini said, “My anticipation will be that in ’18 we’ll see a lot of markets without any coverage at all.” Asked if Aetna was pulling out, he replied, “We have not yet made that decision.” Bertolini explained that the company’s decision to pull back from many Obamacare markets this year was based on significant losses and that Aetna expected to lose money again in those markets where it remained. However, he said a final decision wouldn’t be reached until April.

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The Washington Post spoke to Cynthia Cox at the Kaiser Family Foundation about Bertolini’s blunt suggestion Obamacare was in a death spiral. Cox argued that wasn’t true:

Cynthia Cox, associate director of a program focused on health reform and private insurance at the Kaiser Family Foundation said that in a true death spiral, the people buying insurance on the exchanges should be a progressively sicker group of people each year. Although the people buying insurance have been sicker than insurers projected, Cox said there isn’t evidence that the pool of people is getting sicker.

One sign of a death spiral would be fewer young adults, who tend to be healthier, signing up — something that Cox says hasn’t happened. Another protection against a death spiral is that roughly 85 percent of the people who buy insurance through the exchanges are insulated from premium increases by subsidies, she said.

“Between the subsidies the people are getting, the continued strong enrollment, generally, and the fact we haven’t seen a significant drop off in the young adult age range — those are the signs we’re not really seeing a death spiral yet,” Cox said.

There is actually some evidence that that people in the risk pool might be getting sicker, though it’s not conclusive. As for the 85% statistic, I’ve pointed out repeatedly that it is true and also very misleading since millions of people buying Obamacare plans are not doing so on the exchanges and thus are not insulated from premium hikes. As for the claim that enrollment is strong, final numbers for the entire country are not out yet but enrollment on the federal exchange during the most recent open enrollment period was lower than last year. Estimates suggest the final tally will be more than 1 million below the number projected by HHS last October.

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Obamacare has been struggling for some time but for all of last year 4 of the 5 largest insurance companies in the U.S. had a good motive not to say anything critical, much less suggest they were ready to jump ship. But now that the mega-mergers have ended after lawsuits by the Obama DOJ, these companies have no reason to keep pretending all is well. That’s why Humana pulled out of the exchanges yesterday and why Bertolini is suggesting Aetna and others will likely follow.

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