Aetna, cynicism and Pennsylvania

Jonathan Cohn reports on report on Aetna’s strategy on linking Exchange participation and the rapid approval of their merger.

the move also was directly related to a Department of Justice decision to block the insurer’s potentially lucrative merger with Humana, according to a letter from Aetna’s CEO obtained by The Huffington Post.

Aetna Letter

TLDR: Nice exchanges there, be a pity if anything happened.

One of the states Aetna pulled out of is Pennsylvania. This is odd as a friend of the blog pointed out to me offline. Below is Aetna’s rate application memo for the individual market in Pennsylvania. You should look closely at the highlighted segment.

Aetna

Aetna was profitable in 2015 in the individual market in Pennsylvania. It is projecting to be profitable in 2017. The filing memo was drafted in late May and submitted to the Pennsylvania regulators in early June. Conditions have not changed enough to make Pennsylvania a money loser in under two months.

My wee bit of cynicism bears fruit. Aetna is trying to logroll an anti-competetive merger with on-Exchange political consequences. If it works for Aetna/Humana it burns a bridge to get the merger, and if it fails, it puts Aetna on the shitlist of any Democratic administration. That is a very interesting strategy when it is highly likely that there will be another Democratic administration.

UPDATE 1: Here is the relevant chunk of the 2016 Aetna filing memo for Pennsylvania.

Aetna 2016 filing memo

So in all years Aetna’s individual market operations in Pennsylvania were either profitable or projected to be profitable. Something stinks worse than a wrestling team’s locker room after two-a-days.

58 replies
  1. 1
    RSR says:

    >>TLDR: Nice exchanges there, be a pity if anything happened.

    haha, I was just about to tweet almost these exact words to you. Was making a pot of coffee when I saw the new post.

  2. 2
    Baud says:

    Nice find. Thanks, Richard.

  3. 3
    amk says:

    So, no antitrust law suits then?

  4. 4
    MomSense says:

    You’re spidey sense is uncanny. Now how do we get the “news” media to pick this up?

  5. 5
    raven says:

    @MomSense: That’s where I read about it first.

  6. 6

    @MomSense: I’ve sent this out to my health policy wonk contacts — it is getting picked up.

  7. 7
    Anya says:

    “Tom Daschle is a lobbyist for Aetna. This proves both parties are corrupt.” A BernieorBuster

  8. 8
    Matt McIrvin says:

    They might have gambled that they could make there not be another Democratic administration.

  9. 9
    Baud says:

    @MomSense: Just saw a tweet from the WSJ. Story is getting play.

  10. 10
    nonynony says:

    @Matt McIrvin:

    They might have gambled that they could make there not be another Democratic administration.

    I think that would be stupid.

    I suspect that it’s more that they didn’t think anyone would notice what they were doing because of the Trump Shitshow.

  11. 11
    David Fud says:

    These guys want their merger related hookers and blow, or they are taking their ball and going home. $14MM is chump change. Loot or bust.

    Seems to me they need to talk to their statisticians about their high risk strategy. Doesn’t seem like the brightest thing I have seen done, though apparently clever and wise diverge widely in the executive suite.

  12. 12
    MomSense says:

    Wow. Is our journalists learning?

  13. 13
    I'mNotSureWhoIWantToBeYet says:

    I like that quoted paragraph which basically says:

    We want to get bigger (to increase our monopoly rents and so that management can get more hookers and blow). The DOJ might not let us, so, because it will cost us money if we don’t succeed, we’ll pay for it by taking money out of our soon to be profitable business (that helps people, that is our core business) to pay the lawyers and the other party’s lawyers and management (so that they can get more hookers and blow). And we’ll explicitly tie the cutbacks to the DOJ so that we can’t be blamed for it. And at the end of the year we’ll collect our big bonuses (so that we can get more hookers and blow) by arguing that we’re becoming more efficient! And we’ll pave the way for a weaker Obamacare system that will make mergers easier with fewer restrictions in the future!! Genius!!1

    Heads they win big, tails they think they win. And they think they win in the long run because they think the “bad publicity” about cutbacks on the Exchanges is somehow going to hurt antitrust enforcement.

    The Aetna board should fire the CEO, and they should rescind the cuts. Will they? Doubtful, unless this really blows up in the next few weeks… Maybe Gucicfer 2.0 has something on them that he’s just waiting to release? :-/

    Cheers,
    Scott.

  14. 14
    MobiusKlein says:

    Anecdotal bit here: on if my college friends just now was complaining about Aetna declining coverage of basic woman’s heath coverage, and networks so narrow she could not find a provider.

    This is in San Jose ca, so there are plenty of places to go.

    Seems like Aetna is shitty in a number of ways

  15. 15
    El Caganer says:

    I just moved to Florida from Pennsylvania, and my Medicare supplement is with Aetna. Am I screwed?

  16. 16
    Keith says:

    So in ’14 they achieved 10.5% gross profit, 5.7(7)% after PA state and Fed, in ’15 they achieved 19% gross profit, 10.4(8)% after taxes.

    Unless their fees are massive, which they might be, it seems they have not got anything financial to gripe about – they were aiming for 3.9% after taxes and fees.

  17. 17
    jon says:

    And here’s a problem that hasn’t popped up anywhere yet: Pinal County, Arizona has no insurer on the exchanges. None. Of all the rural areas in this country, I wouldn’t have picked that one as the place this would first happen. And it certainly won’t be the last.

  18. 18
    satby says:

    @MobiusKlein: Aetna was my last employer insurance, and the worst I ever had. And rates went up and coverage declined every single year I had it too. I hope the DOJ or whoever has power throws the book at them and fines them almost into oblivion.

  19. 19
    WereBear says:

    @I’mNotSureWhoIWantToBeYet: To which I would add, that the actual work is done by their poorly paid drones — they simply plan how to get more hookers & blow.

    I have yet to talk to a person in an insurance company who is not simply front line troops. And we all know how expendable those are!

  20. 20
    nonynony says:

    @MobiusKlein: Aetna is actually the worst insurance company I’ve ever had to deal with. I only had them as supplemental because they were my wife’s employer’s choice but when they finally dropped them and she switched over to another provider suddenly all of the problems that they kept blaming on our doctor’s office were gone. Not a single denial that should have been paid being blamed on a “coding error” from the doctor’s office.

    In my experience the only company that was worse to deal with than Aetna was the old SBC before they became AT&T again. Even Time-Warner was easier to deal with. (Full disclosure – I’ve never had to deal with Comcast – they could perhaps be worse).

  21. 21
    MomSense says:

    @WereBear:

    Just caught your discussion of dealing with treatment for rare conditions. Mine isn’t all that rare but it can be expensive. The Superintendent of the Bureau of Insurance (insurance regulator) in my state was very helpful to me when I needed some back up in dealing with my insurance company.

  22. 22
    Julian says:

    Hi Richard, I don’t disagree with the overall conclusion of this article but it looks like the rate filing was posted before the risk adjustment payments were finalized. Maybe I’m missing something but it looks like the entity in question had a large risk adjustment outflow which would completely change the actual economics.

    https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/June-30-2016-RA-and-RI-Summary-Report-5CR-063016.pdf

  23. 23
    rikyrah says:

    I don’t get my way, so I’m picking up my marbles and going home?

    really?

    seriously?

  24. 24
    nonynony says:

    @rikyrah: This feels less like a tantrum and more like a “pay me what I want or I burn the shop down”.

  25. 25
  26. 26
    J R in WV says:

    Insurance companies in the medical field make their money by acting as barriers to patients who need health care. They take money that should be funding the treatment of ordinary, or rare or expensive health problems, and KEEP IT.

    That’s their profit margin. Not only the hookers and blow funds, but all of it. They are immoral scum, especially Aetna, and I suspect United, because of their history with Medicare Fraud in the billions of dollars.

    So, yes, I too hope the DoJ fines Aetna a monumental amount of money for being liars about their profit margins and willingness to shaft multiple states full of patients in an effort to further monopolize their provision of health care barriers in the name of profits.

  27. 27
    Richard Mayhew says:

    @J R in WV: On what grounds does the DOJ have to act? This is an “internal business decision” of a company operating in a capitalistic system. IANAL, but I have a hard time seeing a case and a cause here. Being a douchebag extraordinaire is not a tortable offense in and of itself.

  28. 28

    Aetna was my provider when I was in school, my experiences were by and large positive but apart from a twisted ankle and my annual checkup I didn’t really use my insurance.

  29. 29
    Chris says:

    @rikyrah:

    Well, yeah. I’m pretty sure that in the thirty six years since Reagan’s election, many and possibly most of the country’s corporate overlords have become convinced that they are in fact entitled to anything they want and that if they don’t get it they should totally take their ball and go home. And why wouldn’t they be? The country’s overrun with sycophants – in the media, in think tanks, in politics – who rush to tell them exactly that.

  30. 30
    Ed St Clair says:

    The most unrealistic part of the entire article is the statement “That is a very interesting strategy when it is highly likely that there will be another Democratic administration.” Puhleeze!! Otherwise, very insightful…a true revelation of the mindset of corporate America.

  31. 31
    quakerinabasement says:

    In Aetna’s PA statement, the company projects that admin expenses will nearly double as a percentage of premiums between 2016 and 2017. WT everlovin’ F?

  32. 32

    “Something stinks worse than a wrestling team’s locker room after two-a-days.”
    Maybe so, but it doesn’t change the fact that SE PA now has one choice for exchange plans. And when you only have one choice, that’s not a choice.

  33. 33
    lurker dean says:

    i tweeted a link to this post to the phila inquirer reporter who wrote a story about aetna withdrawing from PA, let’s see if he follows up…

  34. 34
    Villago Delenda Est says:

    @J R in WV: They.are.parasites.

  35. 35
    Villago Delenda Est says:

    @quakerinabasement: Their blow dealer wants more, and the hookers want more.

  36. 36
    Villago Delenda Est says:

    @schrodinger’s cat: You were their ideal customer…one who paid in, and didn’t ask for much back.

  37. 37
    martian says:

    Fucking Aetna. My surgical oncologist said they were the worst. He said he had to keep a person employed full time just to keep following up on claims and paperwork mainly with them, though they were not the only culprits. It was his opinion that they were counting on a certain percentage of people just giving up or forgetting to keep following up, and then they got to keep the money. Being a shitty company was part of their business plan, a feature, not a bug..

  38. 38

    The wee bit of cynicism bears bitterly clinging fruit….

  39. 39
    RaflW says:

    At the time this strategy was being drafted, the CW was that Pennsylvania would be in play for Trump. A major player pulling out of the PA Exchange looks bad for ACA, and the Repubs want things to look bad for ACA.

    Richard, do you know if anyone has done a red/blue analysis of states where insurers are pulling up stakes?

    ETA (and related to @jon‘s comment): I was talking with my partner last night about the broader issue of insurers leaving markets or jacking rates 40% that we wondered if this will get the ball rolling for a public option. Of course we’d need a tsunami election to have the politics even remotely in place for that in the short term, but it just strikes me that insurers are playing a game here that they could lose.

  40. 40
    Richard Mayhew says:

    @brendancalling: no, but it could significantly lower post-subsidy premium costs

  41. 41

    @martian: I am willing to believe that Aetna is the worst offender, but every medical office has to keep a person on staff to fight with every insurance company. Naturally, if you’re an independent operator such as a massage therapist, you are well-and-truly’d.
    I once signed on for a year with an outfit which promised me increased business if I agreed to offer a steep discount to policyholders, part of which they would reimburse me for.
    I offered the discount, and business increased. Guess what didn’t happen? Hint: it won’t cost you a thousand dollars to find out.

  42. 42

    It is as I said. A solid opportunity for a solid profit is not enough for these guys. They’ve gotta have their monopoly.

    At this rate, a public option is going to be the only way to keep the system functional in some states. Better hope that Hillary Clinton really does have those brass balls conservatives keep talking about.

  43. 43
    ding says:

    Pennsylvania has 67 counties – why aren’t all of them listed? Are the non-listed countes staying in the ACA?

  44. 44
    joel hanes says:

    When I worked for [a large software company whose name you’d instantly recognize] Aetna was our insurance administration (the company was big enough to self-insure). Aetna repeatedly declined to pay for care explicitly covered in the contract, and I had to get the company benefits managers to intervene at least once a year for three years in a row. In the fourth year, my company dumped them for someone else.

    Fuck them.

  45. 45
    Mnemosyne says:

    Ah, Aetna. The company that refused to cover my overnight admission to the hospital for possible appendicitis because my PCP was on vacation and I saw someone else IN THE SAME OFFICE.

    The hospital was surprisingly nice when I explained why I wasn’t going to pay my part of the bill until Aetna paid theirs, which they finally did …

    Four years later.

  46. 46
    Arclite says:

    “That’s a nice exchange you got there. It would be a shame if anything were to happen to it.”

  47. 47
    martian says:

    @John M. Burt: Oh, I agree that all of them are doing it, but Aetna seems in a rapacious class of it’s own. I’m sorry you got bitten like that. I used to think the horror stories were just the result of bureaucratic inefficiencies, but I don’t anymore. The system is functioning as intended, squeezing every vulnerable point for profit.

  48. 48
    Dave says:

    @ding: The counties listed are the only ones in which Aetna does business on the ACA website. Aetna doesn’t offer plans in the rest of PA, as the ACA doesn’t require that insurance companies offering plans in a particular state service the entire state (yet another flaw introduced by Republicans and Conservadems so as to allow private corporations to cherry-pick the most profitable customers, #thankslieberman #thanksbaucus.)

  49. 49

    […] CNBC after the insurer’s profitable Pennsylvania picture was first highlighted by the website Balloon Juice on […]

  50. 50
    Bill Arnold says:

    In case you didn’t know, also linked and praised and described by Kevin Drum:
    Why Is Aetna Pulling Out of Nice, Profitable Pennsylvania?

  51. 51
    ding says:

    @Dave:
    thank-you

  52. 52

    […] Pennsylvania is one of the markets that Aetna has abandoned, claiming it can’t make a profit. Yet by its own numbers, it DOES make a profit in […]

  53. 53

    […] Last night I linked to a letter from Aetna to the Department of Justice explaining what they would do if their merger with Humana wasn’t approved. The answer, basically, was that they’d pull out of a bunch of Obamacare exchanges. As insurance pro Richard Mayhew puts it: […]

  54. 54
    Tim Shea says:

    @Anya: Hey , show a little sympathy. It’s really tough finding commensurate income once you’ve left a job where little work was needed.

  55. 55

    […] Last night I linked to a letter from Aetna to the Department of Justice explaining what they would do if their merger with Humana wasn’t approved. The answer, basically, was that they’d pull out of a bunch of Obamacare exchanges. As insurance pro Richard Mayhew puts it: […]

  56. 56

    […] CNBC after the insurer’s profitable Pennsylvania picture was first highlighted by the website Balloon Juice on […]

  57. 57

    […] cites Richard Mayhew writing for Balloon Juice and Charles Gaba writing for ACASignups reporting that Aetna is profitable in the Pennsylvania ACA […]

  58. 58

    […] money. Curiously, though, one of those states is Pennsylvania, where (according to Aetna itself, as Richard Mayhew pointed out) it made a healthy profit there in the individual market for at least the past two years, and it […]

Trackbacks & Pingbacks

  1. […] money. Curiously, though, one of those states is Pennsylvania, where (according to Aetna itself, as Richard Mayhew pointed out) it made a healthy profit there in the individual market for at least the past two years, and it […]

  2. […] cites Richard Mayhew writing for Balloon Juice and Charles Gaba writing for ACASignups reporting that Aetna is profitable in the Pennsylvania ACA […]

  3. […] CNBC after the insurer’s profitable Pennsylvania picture was first highlighted by the website Balloon Juice on […]

  4. […] Last night I linked to a letter from Aetna to the Department of Justice explaining what they would do if their merger with Humana wasn’t approved. The answer, basically, was that they’d pull out of a bunch of Obamacare exchanges. As insurance pro Richard Mayhew puts it: […]

  5. […] Last night I linked to a letter from Aetna to the Department of Justice explaining what they would do if their merger with Humana wasn’t approved. The answer, basically, was that they’d pull out of a bunch of Obamacare exchanges. As insurance pro Richard Mayhew puts it: […]

  6. […] Pennsylvania is one of the markets that Aetna has abandoned, claiming it can’t make a profit. Yet by its own numbers, it DOES make a profit in […]

  7. […] CNBC after the insurer’s profitable Pennsylvania picture was first highlighted by the website Balloon Juice on […]

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