‘Too big to fail’ health insurers up the ante on ‘ObamaCare’ by retaliating over anti-trust litigation


So there was this “scary” headline in the Arizona Republic the other day: Aetna plans to drop Affordable Care Act health-insurance coverage in Arizona:

ObamacareWith health-insurance giant Aetna dropping Affordable Care Act coverage in Arizona and 10 other states next year, Pinal County residents could be left without a health-insurance marketplace option unless another insurer adds coverage to the fast-growing county.

Aetna planned to expand in Pinal, and was poised to be the county’s only marketplace option when coverage for the new year begins Jan. 1. But the insurer announced this week that it would drop ACA plans in Pinal and Maricopa counties as part of a nationwide pullback.

Insurers have filed to offer health-insurance plans in every Arizona county except Pinal, which becomes the only known county in the nation without an insurer lined up for marketplace coverage next year.

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Pinal County officials expressed worries that thousands of residents could be left without access to health coverage. HHS records show 9,667 Pinal County residents had selected a marketplace plan as of Feb. 1.

But fears of no insurance providers may be short-lived. Officials with Blue Cross Blue Shield of Arizona confirmed they were in contact with insurance regulators following Aetna’s exit.

Blue Cross Blue Shield announced earlier this year that it would discontinue marketplace coverage in Maricopa and Pinal counties in 2017. The insurer cited $185 million in financial losses in 2014 and 2015 as factors for the pullback.

But after Aetna’s exit, Blue Cross Blue Shield said it would reconsider.

“We are re-evaluating our 2017 plans and where Blue Cross Blue Shield of Arizona makes coverage available,” the insurer said in a statement. “Our leadership team is in the process of speaking with regulators in light of the recent news of Pinal County residents having no options.”

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A wave of health insurers have announced plans or filed paperwork to exit Arizona’s marketplace altogether or scale back offerings in some counties in 2017.

Insurers cite financial losses with marketplace plans as a factor. But financial reports show publicly traded insurers have enjoyed robust profits in other parts of their business, including plans offered to employers or government insurance programs such as Medicare and Medicaid.

Aetna joins UnitedHealthcare, Health Choice Insurance Co. and Humana as insurers discontinuing marketplace plans in Arizona. Health Net will only offer plans in Pima County next year, according to state Department of Insurance filings.

The wild card is Blue Cross Blue Shield, an insurer that has sold plans in every county in Arizona since the Affordable Care Act marketplace launched on Jan. 1, 2014. The insurer’s filings with state regulators indicate it will drop Maricopa and Pinal counties next year, but the insurer’s statement indicates that it will re-evaluate its footprint in the wake of Aetna’s exit.

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Analysts said the large number of insurance companies dropping coverage in Arizona could put the state in a unique position. It was once considered among the robust insurance exchanges based on the number of insurers competing for business. But consumers will be left with far fewer choices this year.

“The way it (insurer exits) has hit Arizona is particularly noticeable relative to other states,” said Cynthia Cox, associate director of the Henry J. Kaiser Family Foundation’s program for the study of health reform and private insurance. “It’s going from a state that had quite a few insurers to having very few insurers.”

So what is really going on here? The Republic does not tell you in the above reporting. For “the rest of the story,” Nancy Le Tourneau at the Political Animal blog has a good summary of the investigative reporting. Aetna’s Exit From Obamacare Exchanges is Related to DOJ Antitrust Litigation:

Off the campaign trail, the big story over the last couple of days has been the fact that Aetna is opting out of participation in 11 of the 15 health insurance exchanges in which they have previously participated. Of course for Republicans, this is being blasted as yet another example of why Obamacare has always been doomed.

For example, see the patrician prevaricator for the Plutocracy, George Will’s mini-me, Robert Robb, at The Republic. Robb: Why politics are killing an Obamacare fix (totally off-base analysis).

The reason Aetna gave for this change is that they were losing money on the exchanges. But Jonathan Cohn and Jeffrey Young win the award for “scoop-of-the-day” by demonstrating that is not all there is to this story. Apparently as recently as April, Mark Bertolini (Aetna’s CEO) said this about the exchanges: “We see this as a good investment…” What changed?

…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

Publicly, Aetna representatives this week framed their about-face as a reaction to losses the company was taking on Obamacare customers, and in particular figures from the second quarter of 2016 that the company had just analyzed, showing them to be sicker and costlier than predicted…

But just last month, in a letter to the Department of Justice, Aetna CEO Mark Bertolini said the two issues were closely linked. In fact, he made a clear threat: If President Barack Obama’s administration refused to allow the merger to proceed, he wrote, Aetna would be in worse financial position and would have to withdraw from most of its Obamacare markets, and quite likely all of them.

Here is a direct quote from Bertolini’s letter to the DOJ on July 5 ― 16 days before the Justice Department announced that it would sue to stop the merger.

Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint …. [I]nstead of expanding to 20 states next year, we would reduce our presence to no more than 10 states .… [I]t 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. 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.

In other words, back in early July, Aetna was prepared to absorb the losses and even expand their participation in the exchanges…on the condition that DOJ didn’t try to stop the merger.

Most of us would be sympathetic to a private company that is incurring financial losses. But why would Aetna have previously been willing to sustain them? To answer that question it is important to note – as Ezra Klein did in response to this news – that “Right now, there are five large insurance plans in the United States: Aetna, Humana, UnitedHealth, Cigna, and Anthem.” That is precisely why DOJ decided to fight the mergers that would have resulted in taking that number from 5 to 3.

The U.S. Department of Justice and attorneys general from multiple states and the District of Columbia sued today to block Anthem’s proposed acquisition of Cigna and Aetna’s proposed acquisition of Humana, alleging that the transactions would increase concentration and harm competition across the country, reducing from five to three the number of large, national health insurers in the nation…

“Competitive insurance markets are essential to providing Americans the affordable and high-quality healthcare they deserve,” said Attorney General Loretta E. Lynch. “These mergers would restrict competition for health insurance products sold in markets across the country and would give tremendous power over the nation’s health insurance industry to just three large companies. Our actions seek to preserve competition that keeps premiums down and drives insurers to collaborate with doctors and hospitals to provide better healthcare for all Americans.”

As Thomas Greaney wrote, the “tremendous power” that AG Lynch says these mergers would have given these insurance companies goes beyond their ability to maneuver premiums.

A further concern relates to the influence that a highly concentrated insurance industry may wield in Congress, state legislatures, and regulatory agencies. With a large and growing portion of beneficiaries in Medicare and Medicaid served by private insurance companies, the laws and administrative regulations that govern plan bidding, appeals, and administration of health plans are increasingly important.

The ability to influence these rules are as significant to the bottom line as any aspect of insurers’ business operations.

In other words, Aetna was aiming for a “too big to fail” scenario with health insurance companies. The DOJ basically said, “No.”

As Paul Glastris recently pointed out, the Washington Monthly has been on the front lines of spurring examination of the economic threats posed by this kind of consolidation.

tr-trust-busterAs our readers know, economic consolidation is a subject the Washington Monthly has long been obsessed with…In our current cover story, Barry Lynn and Phil Longman argue that antitrust was the true legacy of the original American Populists and a vital, under-appreciated reason for the mass prosperity of mid-20th Century America. But this legacy, and the new Gilded Age economy that has resulted from its abandonment, is not a narrative most Americans have been told (one reason why even the “populist” candidates running for president have shied away from it).

That antitrust legacy is exactly what is playing out right now between health insurance giants like Aetna and DOJ. There is only one presidential candidate that is paying attention. Here is an op-ed by Hillary Clinton from back in October 2015.

Despite all the progress we’ve made coming back from the financial crisis, we still have a lot of work to do. Consider:

Some pharmaceutical companies recently have raised the price of medications that have been in use for decades by up to 5,000% overnight—gouging patients on drugs that should be getting cheaper over time, not more expensive. The three largest health insurance companies now control 80% of the market in 37 states…

Economists, including President Obama’s Council of Economic Advisers, have put their finger on what’s going on: large corporations are concentrating control over markets…Rather than offering better products for lower prices, they are using their power to raise prices, limit choices for consumers, lower wages for workers, and hold back competition from startups and small businesses.

It’s no wonder Americans feel the deck is stacked for those at the top. It’s good for our economy when companies prosper by innovating, creating new products, and investing in their workers. But in too many instances, that’s not what’s happening. Just as declining union membership means workers have less bargaining power to improve wages and benefits, increasing concentration in a given market means customers can no longer vote with their feet and take their business elsewhere…

As president, I will take on this fight.

In case you are worried about the viability of the exchanges in all of this,
Tierney Sneed points out exactly what Clinton was talking about when she referred to companies that prosper by innovating and creating new products.

Not every carrier is struggling on the exchanges, and consumers’ willingness to shop around for deals has benefited insurers that offer plans that are on the cheaper end.

“There are insurance companies that are doing well and those are companies that have experience serving a low-income population,” Cox said.

The New York Times editorialized, Obamacare Will Survive Aetna’s Retreat (taking note that the insurer could be pressuring the Justice Department to drop or settle a lawsuit it filed last month to block Aetna’s proposed $37 billion acquisition of Humana).

There is simply too great a concentration of wealth and power in the financial services sector — banking, insurance, investment — and an aggressive anti-trust effort to break up these “too big to fail” monopolies and to restore free market competition is long overdue.


  1. Wasn’t that the original plan of Obamacare all along? Drive out private healthcare companies and make it impossible for anyone but the Government to provide some form of manditory health care? The co called “single payer” system so eagerly sought by the left? I wanted Obamacare to work, but I am seeing it slowly strangled to death by increasing Government “oversight” and I know that we are headed towards the much desired Government provided healthcare system. My wife was Canadian and her relatives back in Canada used to come to the United States for serious health care issues. Where we all go after “single payer” kicks in?

    • Steve,
      No, the Obamacare plan was to foster competition among health insurance companies to provide coverage to the 30 or so million uninsured Americans. And so far it has worked well, and health care costs have tended to be lower than expected. Krugman gives an overview:
      But if insurance companies are more interested in mergers than free market competition, then there should be state options. Arizona could use its existing AHCCS program at market rates to provide coverage to the 10,000 Pinal County residents.
      I’ve been hearing the Canadian canard for awhile, I think it’s mostly anecdotal. My sense is that most Canadians are happy with their single payer system.

      • Generally succeful at affordability, Jim? When open enrollment starts Nov. 1, the public will see they’re going to be paying lots more for health insurance in 2017 and getting less. Across the country, state insurance departments are announcing double digit premium hikes, often as high as 20 percent and occasionally even 40 percent. People who earn too much to qualify for a subsidy will be forced to pay as much as a fifth of their income for health insurance. And they’ll get less choice of doctors and hospitals and less prescription drug coverage. A major cause for these Draconian changes is that subsidies to low income recipients expire and people will begin paying the true cost of their health insurance. For Democrats the timing couldn’t be worse because that is only a few days before the election.

        But back to the point: Yes, most Canadians are happy with their system. Most Canadians, like most Americans, are basically healthy and the Canadian system works just fine. Where the problems arise are with intensive/severe health problems and/or long term health problems. Then the quality of the care becomes a crap shoot. If your Province has the cash, you get decent care…if it doesn’t, then you have a problem. If you live in Ontario or Quebec Provinces, lucky you, more money for better care. If you live in Newfoundland or Nova Scotia Provinces, too bad, less money for not so good care.

        Whether I care for it or not, I think it is the future of healthcare. But it was nice hearing from you, Jim!

    • I have both U.S. and Canadian citizenship and live primarily in Arizona. In 2015 we spent a month in Maritime Canada, and in 2016 a month in British Columbia. Several years ago we traveled through Ontario, Quebec and Maritime Canada. I mention this partly because many Americans do not realize that Canadian healthcare is administered by the provinces not the Canadian Federal government. As part of our travels we ask pretty much everyone we can what they think of the Canadian healthcare system. The response is almost universally favorable! Occasionally we would hear a complaint about waiting for care but after some exploring it appeared these were non-emergency elective situations where the wait was about as long as you would experience in the U.S. It should be noted that in both countries you can have very little waiting if you have enough money. Rationing by checkbook!
      With regard to maintaining a competitive healthcare insurance environment: Isn’t competition one of the Republican party’s guiding principles? Changing the situation to one where there are three players instead of five is very competition reducing. Imagine the reaction if Major League Baseball allowed Toronto and Boston to merge and also allowed New York (Yankees) and Baltimore to merge to create a three team American League East.

      • Bill, I agree with you. I think most Canadians are happy with their system. As I told Jim Hannan, if you are basically healthy (as most Canadians are) their systems is completely adequate. The problems arise if you are not generally healthy and require more than ordinary care. Then it becomes a bit of a crap shoot as to the quality – or even availability – of care. Your comment about money getting you quality health care wherever you are is true, but Democrats hate the very idea of that. That is one of the reasons that people with money pay such exorbitant insurance rates for their health care.

        You ask me if competition isn’t a cornerstone of the Republican philosophy. The truth is I don’t really know what the “Republican Philosophy” is anymore. The Party has lost its way.

        • “The truth is I don’t really know what the “Republican Philosophy” is anymore. The Party has lost its way.”

          I suspect it pained you to type that, but it’s true, and believe it or not, it’s painful for all of us.

          We need at least two functioning parties. Single party rule leads to indifferent public servants and corruption.

          Our state government in Arizona is a prime example, but I lived through Democrat Willie Brown’s reign back in California, too.

          It’s not good either way.

          • Yes, I was pained to admit the Republicans have lost their way. I have nowhere to go now. I agree with you that we need two healthy parties to at least provide a forum for opinions and thoughts to be argued. A nation is healthier when there is someone else waiting to replace you if you don’t stay focused.

    • All the Canadians I know love their healthcare system and think we’re crazy.

      We have US citizens going to Mexico and India for operations because the cost of US healthcare includes CEO bonus money and shareholder ROI, and they can get the same or better care overseas.

      Bus loads of old folks cross into Canada to buy meds, because pharma companies gouge US customers. Bernie Sanders used to organize these bus trips back in the day, one reason he’s so loved in his home state.

      For Republicans to claim we’re a Christian country, then say, “Don’t feel good? We can help, but what’s in it for the shareholders?” doesn’t seem like a very Christian way to run a healthcare system.

      Look up Martin Shkreli, the poster boy for what’s wrong with healthcare in the US, read his writings on why he believes in price gouging.

      Insurance companies come with 30%, or more, in overhead, vs. 2-3% for SSI and Medicare. The government can do some things right, contrary to the GOP’s constant, shrill whining about “Putting your healthcare in the hands of the same people who brought you the DMV.”

      Plus insurance companies make their money on claims they don’t pay, they do not work for their customers.

      The most cited example is the CEO of United Healthcare, who took home 1 billion in compensation over 10 years, 100 million a year, and yet never put a single bandaid on a skinned knee.

      FYI, I’ve had great experiences with my insurance companies and bad experiences. I know people who love their insurer and some folks who hate theirs.

      We pay more as a percentage of GDP for healthcare than any other developed country and we do not have longer lifespans or higher infant survival rates. We have the best healthcare money can buy, if you have money.

      It’s ridiculous. It’s healthcare, and this is the USA in 2016. Everyone else does it but we can’t? I have a higher opinion of Americans than that.

      The public option makes financial sense to anyone who cares to look at the math, so Republicans to claim that they’re they party of fiscal responsibility doesn’t seem to match up with reality, either.

      And FYI, Obamacare, or the actual, non-dog whistle name, the Patient Protection and Affordable Care Act, was designed in response to Hillary’s proposal in the 1990s by those radical commies at the Heritage Institute, and was the model for Romneycare.

      And as we all know, Massachusetts is completely bankrupt…oh, wait, no it’s not.

      Free Enterprise is a great tool, but that’s all it is, it should not be an ideology or religion. I’ve run my own business before and expect to again, but sometimes Free Enterprise is the wrong tool for the job.

      • You really fired a shotgun against the wall with this response, Not Tom! You are all over the map on this and cited every cliche possible. I have no idea how to even begin responding, so I am not even gonna’ try. You win…

  2. this is why obama should have demand medicare for all and let the two democrat senators bought by healthcare insurance company they would be punished if they didn’t vote to break filibuster.

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