Blog Coverage: Obamacare Receives Another Jolt as Health Insurer Aetna Announces Withdrawal from all Current Affordable Care Act Exchanges

Upcoming AWS Coverage on Humana Post-Earnings Results

LONDON, UK / ACCESSWIRE / May 12, 2017 / Active Wall St. blog coverage looks at the headline from Aetna, Inc. (NYSE: AET) as the health insurance Company announced on May 10, 2017, that it will be exiting from the Affordable Care Act Exchanges at Delaware and Nebraska from 2018. These two were the last states where the Company was offering its affordable health insurance plans in the current year. Register with us now for your free membership and blog access at:

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One of Aetna’s competitors within the Health Care Plans space, Humana Inc. (NYSE: HUM), reported on May 03, 2017, detailed first quarter financial results; and reaffirmed its recent full-year 2017 EPS guidance increase. AWS will be initiating a research report on Humana in the coming days.

Today, AWS is promoting its blog coverage on AET; touching on HUM. Get all of our free blog coverage and more by clicking on the link below:

http://www.activewallst.com/register/

Factors influencing Aetna’s decision

In April 2017, Aetna had already announced the exit from exchanges in the states of Iowa and Virginia. At that time, the Company had indicated that it would significantly reduce its participation at the Exchanges. In 2016, the Company had announced that it would exit from 11 states in FY17. The decision was based on the projected losses of more than $200 million expected in the FY17 from the four states where it had been selling its plans. Aetna has already reported a loss of approximately $700 million for the period from FY14–FY16. Aetna spokesperson had explained that “those losses are the result of marketplace structural issues that have led to co-op failures and carrier exits, and subsequent risk pool deterioration.”

Additionally, Aetna had to bear the cost of the failed merger with Humana. Aetna and Humana called off their merger officially in February 2017, following the US District Court for the District of Columbia ruling in favor of the US Department of Justice which had opposed the merger. Aetna had to pay Humana $1 billion as break-up fee and also call off its agreement with Molina Healthcare, Inc. to sell off some of Medicare Advantage assets and pay the applicable fees associated with that termination.

Commenting on the exit from Exchanges in Delaware and Nebraska, Aetna’s spokesperson said:

“We will not offer on- or off-exchange individual plans in Delaware or Nebraska for 2018, and at this time have completely exited the exchanges.”

Following Aetna’s exit from Delaware and Nebraska, there in only one health insurance Company present in each state that still offers plans at the Exchanges. In Delaware, it is Highmark selling its Blue Cross Blue Shield plans and in Nebraska it is Medica Health, a non-profit insurer.

Medica’s participation next year is in doubt in view of Medica spokesperson Greg Bury’s comments, who said:

“We have not made a decision and are reviewing all of our options.”

Not the Only Health Insurance Company Exiting from Exchanges

Health Insurance Companies participating in the Exchanges and offering their health plans have been facing serious problems for the last few years. Firstly, the number of people buying the health plans from exchanges is well below expectations and, on the other hand, the people who bought the plans are sicker than insurers had anticipated which lead to many insurers facing huge losses and thus compelling them to exit from the exchanges. Those insurance Companies who are continuing to offer the health plans under the exchanges have raised their premiums by double-digit percentages, which has left customers in a very vulnerable position as they have fewer Companies offering even fewer health plans from which they can choose.

As per the details shared by the Kaiser Family Foundation, on top of Aetna there are other large health insurance Companies such as Anthem Inc., Cigna Corp., and Molina Healthcare Inc. that are already pondering on an exit from the Exchanges; however they are yet to take a final call. Insurance Companies Humana Inc. and UnitedHealth Group Inc. have already exited from most of the government Exchanges.

Politics Influencing the Companies’ Decisions

Obamacare, as the Affordable Care Act is also known, has become a political bone of contention between Republicans and Democrats. This issue seems to have reached a critical stage. Obamacare was introduced by President Barack Obama in 2010 as an affordable insurance alternative for all Americans. However, President Donald Trump has been very vocal about his opposition of Obamacare and had promised to repeal Obamacare as a part of his poll campaign. Recently on May 04, 2017, the House of Representatives passed a bill to repeal Obamacare and to replace it with a new health bill called the American Healthcare Act (AHCA). The AHCA has retained some portion of Obamacare; however it has changes in the size and recipients of subsidies. The bill needs Senate’s approval before becoming a law. The Democrats at this point cannot do much to block the bill at the Senate as they do not have a majority. But they are gearing up to put up a fight. Recently payments made to insurance Companies for providing subsidized out-of-pocket expenses to low income customers who cannot afford insurance came under scrutiny. President Trump even threatened to withhold key payments to insurance Companies under the Obamacare. The White House has assured that it will continue to pay the subsidies to the insurance Companies, but it has offered no long-term guarantee.

This uncertainty has impacted the decision of major health insurance Companies to either exit or consider exiting from Obamacare.

Stock Performance

On Thursday, May 11, 2017, the stock closed the trading session at $144.39, rising slightly by 0.94% from its previous closing price of $143.04. A total volume of 3.04 million shares have exchanged hands, which was higher than the 3-month average volume of 2.64 million shares. Aetna’s stock price surged 19.59% in the last three months, 28.80% in the past six months, and 29.94% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have surged 17.12%. The stock is trading at a PE ratio of 44.81 and has a dividend yield of 1.39%.

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