Did Aetna Quit Obamacare When It Didn't Get Big Fat Merger? Elizabeth Warren Says Ayup!

Little-known fact: Butthurt is also covered by Obamacare

We've known for some time now that corporations are people, my friends, so it should be no big surprise they're occasionally capable of acting like petulant toddlers when they don't get their way. Or maybe the Magic of the Free Market just looks that way sometimes. What we're getting at here is that Monday's announcement by insurance megadouche Aetna that it was dropping out of several state healthcare exchanges may have less to do with the viability of Obamacare than with Aetna being blocked by antitrust regulators from merging with Humana.

Now cut it out and keep reading, this is NOT from an Alex Jones conspiracy site. In fact, Aetna management pretty much announced that its continued participation in the exchanges was contingent on the merger being approved. Or, if you prefer, it threatened to stop playing doctor in 11 states if the Obama administration didn't play ball. Here's the straight dope from HuffPo's Jonathan Cohn:

Aetna officials said the pullout was necessary because of Obamacare’s problems ― specifically, deep losses the insurer was incurring in the law’s health insurance exchanges.

But 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.

In that July 5 letter to the DOJ's Antitrust Division, Aetna CEO Mark T. Bertolini informed the administration that if it didn't allow the merger, then poor Aetna, which loves Obamacare very much and would like to see it succeed, might nonetheless just have to pack up and go home to mother:

[I]f the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses. 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.

Then a bit more than two weeks later, the DOJ said no, you cannot have your merger because that would be bad for competition, and then Aetna said fine, screw you guys, we never liked you anyway. This is not good for people currently enrolled in Aetna plans, and not good for the ACA:

Aetna was a pretty significant player in the marketplaces, covering roughly 900,000 people as of this spring. Now it will leave 11 of the 15 states it had previously sold in — forcing nearly a million people to find new plans, and reducing options for Obamacare shoppers in 2017.

Vox is careful to point out that the letter is not proof that Aetna was retaliating for the DOJ's denial of the merger, since it makes clear its motives are financial: "it couldn’t sustain the losses on the marketplace any longer if it didn’t get the economic boost it expected the merger to deliver." But the letter does prove Aetna spokespeople were fibbing when they said there was no connection at all between the merger denial and the decision to get out of those exchanges.

Sen. Elizabeth Warren argued in a Facebook post last week that Aetna's motives weren't solely based on profits and losses: She believes Aetna was very definitely using the threat of leaving the exchanges to leverage approval of the merger:

Similarly, LA Times financial reporter Michael Hiltzik says Aetna's claims that it pulled out of the exchanges solely out of economic considerations didn't fit with the company's previous statements:

The problem with these arguments is that Aetna had previously treated its participation in the exchanges as a sound business decision, despite its failure to break even in the market’s early years. Bertolini laid out a detailed case for continuing to serve the exchanges as recently as April, when he boasted of serving 1.2 million customers on ACA health plans. That was the foundation of a good business line, he told Wall Street analysts. [...]

He said he hoped that the administration would become more flexible in mandating specifications for ACA plans, but in any event “we see this as a good investment.”

Aetna's new claim, that it only realized in April of this year that it couldn't make money in the exchanges, "beggars credibility," says Hiltzik:

 As we observed earlier, if the economics of the exchanges really caught it by surprise between April and August, it should fire its entire financial analysis team. The only thing that really changed in that time frame was the DOJ’s move against the merger.

Imagine that! In fact, LA Times financial reporters found that in one of the states Aetna claims it can't possibly afford to continue business in because of all its losses, the company actually "turned a profit on its ACA exchange business in that state -- $6.4 million on $60 million in premiumsin 2014 ... and $13.6 million profit on $71.4 million in premiums in 2015."

So what's next? Depends. Could be that President Trump will manage to repeal Obamacare and replace it with "something terrific." Or President Clinton and a Democratic majority in the Senate -- and dare we hope, the House, too? -- can pass a Public Option to show insurance companies how real socialized medicine works. Or maybe a Clinton (even an Obama) administration could apply a bit of leverage itself, as Hiltzik suggests:

[T]he government isn’t entirely powerless to goad big insurers like Aetna into greater participation in the ACA exchanges. Among other things, the companies make money hand over fist by serving Medicaid expansions in many states and in Medicare managed-care plans. Why not tie their access to those lucrative markets to sticking with the exchanges until they’re finally stabilized?

Bertolini implicitly tied Aetna’s participation in Obamacare to a green light from the government on the Humana merger. But two can play that game.

Yr. Wonkette doesn't pretend to be a healthcare economist. But we'd like to suggest Michael Hiltzik for Secretary of HHS in the Clinton administration. We like the way he thinks.

[ CNN / Vox / HuffPo / Elizabeth Warren on Facebook / LAT ]