Aetna told DOJ it would reduce exchange participation if mega-merger blocked

Merger lawsuit is scheduled to go to trial on Dec. 5

Aetna officials in a July letter warned the Department of Justice (DOJ) that the insurer would reduce its Affordable Care Act (ACA) exchange business if DOJ attempted to block Aetna's proposed merger with Humana.

Aetna's letter, which the Huffington Post obtained through a Freedom of Information Act request, was written in response to a query from DOJ asking Aetna how a decision to block the merger would affect the insurer's exchange participation.

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Background

Last month, DOJ filed a lawsuit challenging the proposed merger between Aetna and Humana.

Then, earlier this week, Aetna announced plans to significantly reduce its ACA exchange business for the 2017 coverage year. The insurer said it would sell exchange plans in just four states—Delaware, Iowa, Nebraska, and Virginia—for 2017, down from 15 states where it sold 2016 exchange plans.

Aetna to drastically scale back its 2017 ACA exchange business

In the announcement, Aetna cited significant financial losses as the main reason for scaling back its exchange business. The insurer previously had said it expects to lose $300 million on individual exchange plans in 2016, about triple the amount it lost on such coverage in 2015.

The announcement marked a reversal from Aetna's previous optimistic outlook on the exchanges. The insurer last year said it planned to expand its ACA exchange business for 2017 to five additional states.

Some critics, including Sen. Elizabeth Warren (D-Mass.), have alleged that Aetna decided to scale back its exchange presence in response to DOJ's decision.

Details of Aetna's letter to DOJ

In the July 5 letter, Aetna CEO Mark Bertolini wrote that the insurer's proposed merger with Humana would provide the financial stability needed to continue offering exchange plans in many states. He explained that if regulators blocked the merger, Aetna would not be able sustain the financial losses it incurred through its exchange business and would have "to take immediate actions to mitigate" those losses.

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He wrote, "Specifically, if [DOJ] sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint ... Instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states ... It is very likely that we would need to leave the public exchange business entirely and plan for additional business efficiencies should our deal ultimately be blocked."

Further, Bertolini wrote that if regulators approved the proposed merger, the combined company would explore how to further support the exchanges. He wrote, "By contrast, if the deal proceeds without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies ... to supporting even more public exchange coverage over the next few years.

An Aetna spokesperson told the Wall Street Journal that after the letter was sent, the insurer "gained full visibility into our second quarter individual products loss, which is what ultimately drove us to narrow our 2017 public exchange presence" (Cohn/Young, Huffington Post, 8/17; Wilde Mathews, Wall Street Journal, 8/17; Humer, Reuters, 8/17; Sullivan, The Hill, 8/17).

Four principles for insurers to establish their health plan diplomacy

Health plans have a lot in common with the modern diplomat. Diplomats have to be objective, but still empathize with the needs of others. They play a central role in an industry, without directly controlling stakeholder behavior. Finally, they have to persuade their partners to act in the best interest of everyone involved.

Health plans typically track the actions of their members, but for successful Health Plan Diplomacy, health plans should track their own actions. In our infographic, we’ve included four diplomatic principles that plans should apply to their member interactions and the corresponding metrics to measure progress.

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