Facing high-profile withdrawals from online insurance exchanges and surging premiums, the Obama administration is preparing a major push to enroll new participants in public marketplaces under the Affordable Care Act.
The administration is eyeing an advertising campaign featuring testimonials from newly insured consumers, as well as direct appeals to young people hit by tax penalties this year for failing to enroll.
But as many insurers continue to lose money on the exchanges, they say the administration’s response is too late and too weak. The companies point to a fundamental dynamic in the marketplace in which too few healthy people are buying policies and too many sick people are filing costly claims.
And the uneasy truce between the government and insurers, which followed adoption of the health care law, appears to be fraying as some of the large companies say they are leaving or sharply scaling back. Aetna warned the Justice Department last month that the company would curtail its participation in the exchanges if the government sued to block its acquisition of Humana, a major competitor.
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In a July 5 letter, disclosed by The Huffington Post, Mark T. Bertolini, the chairman and chief executive of Aetna, said that in the event of a lawsuit, “we will immediately take action to reduce our 2017 exchange footprint.” He argued that Aetna needed to form a combined insurance giant to mitigate its losses on the exchanges.
The Justice Department filed suit two weeks later, saying that the combination of Aetna and Humana would reduce competition in violation of federal antitrust law. On Monday, Aetna announced that it would sharply reduce its participation in the public marketplaces next year, offering individual insurance products in 242 of the 778 counties where it now provides such coverage.
An Aetna spokesman insisted Wednesday that it was the growing financial losses in the exchanges – not the challenge to its acquisition of Humana – that ultimately “drove us to announce the narrowing of our public exchange presence for the 2017 plan year.”
Anthem, another big insurer, said that its losses had been increasing but that it had no plans to leave the marketplaces. In a separate lawsuit, the Justice Department has challenged Anthem’s proposed acquisition of Cigna. Anthem operates for-profit Blue Cross plans in 14 states and says it can expand to other states only if the merger goes through.
“We’re all in,” said Joseph R. Swedish, the chief executive of Anthem. “We’re committed, but we do need adjustments and not just at the margins.”
The major insurers, which appeared more optimistic about the marketplaces earlier in the year, “have been seeing losses, and the losses have worsened,” said Ana Gupte, an analyst at Leerink Partners who follows the insurance industry. In the case of Aetna, she said, its ability to withstand those losses was weakened when it became clear it might not be able to rely on the cost savings it expected from its merger with Humana.
This tumult is happening as the administration prepares for the fourth annual open enrollment period under Obama’s heath law, which is scheduled to start Nov. 1, a week before Election Day. Most Americans still get their insurance through their employers or government programs such as Medicare, Medicaid and veterans health care.
The insurance exchanges were expected to be a major supplement to that system for people who do not have access to employer plans or government programs. But enrollment in the exchanges – 11 million at the end of March – is far below expectations, and insurers say it must increase to produce a better, more sustainable mix of healthy and less healthy consumers.
Administration officials said they would try to sign up more young adults, with a special emphasis on those turning 26 and moving off their parents’ plans. Officials said that they would, for the first time, send letters about marketplace coverage to people who had paid the tax penalty for being uninsured, a group in which young adults are overrepresented.
The administration is also hunting for consumers who can deliver “testimonials” advertising the benefits of coverage under the Affordable Care Act. “Interested consumers could appear in television, radio, print and/or digital ads and on social media,” the administration said in an appeal sent last week to health care advocates and insurance counselors.
The testimonials could counter negative publicity generated by rising premiums, the withdrawal of major insurers like Aetna, Humana and UnitedHealth from many counties, and the collapse of insurance cooperatives in at least a dozen states. The effort could also raise protests from Republicans in Congress.
Madison Hardee, a lawyer at Legal Services of Southern Piedmont in Charlotte, said that “enrollment stories can be an incredibly powerful tool to connect with consumers.” Such testimonials are urgently needed, she said, because “consumers in North Carolina are already starting to get notices about health insurance companies leaving the marketplace, and they fear the changes will reduce their ability to get quality, affordable coverage.”
The administration has minimized the significance of such setbacks, but that response has rattled insurers even more, suggesting to some that federal officials do not appreciate the depth of the financial and other challenges facing insurers.
In a letter to state insurance commissioners last summer, Kevin J. Counihan, chief executive of the federal insurance marketplace, said that “recent claims data show healthier consumers” and “a decline in pent-up demand for services.” He said again last week, in a blog post, that the marketplace was “gaining healthier, lower-cost consumers.”
Marilyn B. Tavenner, a former Obama administration official who is now president and chief executive of America’s Health Insurance Plans, a trade group, said the administration’s latest assessment of the market was “overly optimistic.”
It is not only for-profit companies that are losing money. Health Care Service Corp., which runs nonprofit Blue Cross and Blue Shield plans in Illinois, Montana, New Mexico, Oklahoma and Texas, said it lost $1.5 billion last year selling individual policies on the exchanges. In some states, insurers have increased their original rate requests for 2017 because, they say, costs surpass recent projections.
In Tennessee, Cigna last week requested rate increases averaging 46 percent, double the request it made in June, and Humana is seeking an average increase of 44 percent, up from 29 percent in June. The other major carrier in the state, BlueCross BlueShield of Tennessee, said it was standing by its original request for increases averaging 62 percent in 2017.
“Obamacare is spiraling out of control,” said Sen. Lamar Alexander, R-Tenn., chairman of the Senate health committee.
Counihan, the administration official, said that with high consumer satisfaction and more people getting care, “the future of the marketplace is strong.” Moreover, the administration said, most people buying insurance on the exchanges receive federal subsidies, so they will not feel the full impact of higher premiums.
Tensions between insurance companies and federal officials over government programs are hardly unusual, said Sabrina Corlette, a professor at the Health Policy Institute of Georgetown University. She said that companies’ business interests may conflict with a program’s policy goals.
“The bigger issue is a lot of people just don’t find it affordable,” she said. “Clearly that is something Congress is going to have to deal with.”