Aetna CEO To Justice Department: Block Our Deal And We'll Drop Out Of Obamacare

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**kronk**

Aetna CEO To Justice Department: Block Our Deal And We'll Drop Out Of Obamacare

Linky: http://www.npr.org/sections/health-shots/2016/08/17/490202346/aetna-ceo-to-justice-department-block-our-deal-and-well-drop-out-of-exchanges?utm_source=facebook.com&utm_medium=social&utm_campaign=npr&utm_term=nprnews&utm_content=20160817

It's not often during the midst of an antitrust fight that the public gets a look at the gamesmanship that's happening behind the scenes.

But thanks to the Huffington Post's Jonathan Cohn and Jeff Young, we got a glimpse at how health insurer Aetna is making its case to acquire rival Humana — and new insight into Aetna's decision announced Tuesday to pull out of Obamcare exchanges in 11 states.

The reporters obtained a copy of a letter from Aetna CEO Mark Bertolini to the Justice Department on July 5. The letter was written while the government was still deciding whether to oppose the insurance companies' merger on the grounds that it (and another proposed deal between Anthem and Cigna) would hurt consumers and reduce competition.

The Bertolini letter was in answer to a Department of Justice request for information about how a decision on the Humana deal would affect Aetna's participation in the health insurance exchanges created by the Affordable Care Act.

The letter is pretty direct. If the government moved to block the merger, then Aetna would begin to pull out of the health insurance exchanges.

Here's the key paragraph (emphasis added):

"Our analysis to date makes clear that if 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. We currently plan, as part of our strategy following the acquisition, to expand from 15 states in 2016 to 20 states in 2017. However, if we are in the midst of litigation over the Humana transaction, given the risks described above, we will not be able to expand to the five additional states. In addition, we would also withdraw from at least five additional states where generating a market return would take too long for us to justify, given the costs associated with a potential breakup of the transaction. In other words, instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states. We also would not be in a position to provide assistance to failing cooperative exchanges as we did in Iowa recently."
The Huffington Post reporters calls the letter "a clear threat."

A little more than two weeks later, on July 21, the Justice Department said it would sue to block the Aetna-Humana deal and the other proposed megamerger between Anthem and Cigna.

On Tuesday, Aetna said it would dramatically scale back its participation on the insurance exchanges in 2017. The company move would take it out of 546 counties in 11 states, leaving it active in 242 counties in four states: Delaware, Iowa, Nebraska and Virginia.

In the company's statement, CEO Bertolini said, "As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision."

The statement made no mention of the company's pending offer for Humana nor its recent correspondence with the government about how Aetna would likely respond if the feds moved to block the deal. Aetna didn't immediately respond to a request for comment on how to reconcile Tuesday's announcement with the July 5 letter made public by Huffington Post on Wednesday.

The change in tack for Aetna is also noteworthy because Bertolini was talking up the business potential of the exchanges as recently as April, when he said during a call with analysts and investors that the exchanges were "a good investment," despite the losses incurred.

At the time, Bertolini said, Aetna was "committed to working constructively with the administration and lawmakers to find solutions that can improve this program, stabilize the risk pool, and expand product flexibility, all with the goal of creating a sustainable program that makes healthcare more affordable and accessible for all consumers."

Now, the company appears to be taking its ball and going home.

For those not in the US, Aetna is a HUGE healthcare provider/insurance company. They serve 46 million Americans across the US. All three corporations I've worked for have used them. They are currently trying to purchase/acquire/whatever Humana, a decently sized healthcare company. They're basically saying "Give us what we want or we're going to stop playing ball on Obamacare".

It's like one of those blatant political threats from House of Cards that never really happens. I would think that they would be a little less...ballsy?...when in the middle of a major merger. Surely this won't backfire, right?!

Also, is this "A little more than two weeks later, on July 21, the Justice Department said it would sue to block the Aetna-Humana deal and the other proposed megamerger between Anthem and Cigna" sour grapes over them wanting to back out of Obamacare or the Justice Department really trying to break-up/stop a Healthcare Monopoly?

Thoughts?

**djones520**

Interesting... my dental insurance provider is switching to Humana. I wonder what this could mean.

**Compel**

Any news on their plans to rename the company Versalife after the merger?

**SickSix**

Well. I am totally against 'mega-megers' and honestly believe our anti-trust laws aren't used enough.

If I was the DOJ I would block the merger. And them basically trying to threaten the administration just proves they are too big for their own good.

By the way I also disagree/don't like Obama care.

**Vaktathi**

One would think a threat like this would incur an anti-Trust investigation of company officers pretty much right off the bat. If I were the DoJ, that's what my go-to response would be to a threat like that.

Compel wrote:
Any news on their plans to rename the company Versalife after the merger?

**kronk**

Vaktathi wrote:
One would think a threat like this would incur an anti-Trust investigation of company officers pretty much right off the bat. If I were the DoJ, that's what my go-to response would be to a threat like that.

That's probably how I would lean. "Don't poke the bear" and all that...

**Frazzled**

Go Aetna. Stick it to the MAN!

**Lord of Deeds**

I want to start off with that I am against both mergers as I agree that overall, these mergers would reduce consumer choice in the overall medical insurance market which is more likely to affect the cost of insurance in the private insurance market.

However I don't really have a problem with what Aetna is doing. They are a for profit business. They looked at the Obamacare exchange market and came up with an analysis that if they wanted to stop losing money in the exchanges, they would need to merge with another insurance provider, otherwise they would need to exit certain markets.

As for the tenor of the letter, it would be naive to think that the DOJ and representatives of the company's proposing to merge were not in regular contact since before they filed. At some point in the review process, Aetna was informed by the DOJ that the DOJ was leaning towards suing to block the merger(s) and that after more "polite" discussions got no where in changing the DOJ's position, Aetna apparently decided that they needed to tell the DOJ in as explicit terms as possible that instead of protecting choice (in the Obamacare exchanges), the action would result in less choice in many exchanges. I am sure if we were privy to all the communications between Aetna and the DOJ we would see a slow escalation culminating in the referenced letter.

Also I think its worth noting that Aetna is not the only "large" insurance provider that is declaring that they are leaving certain or the majority of the public exchanges due to losses.

In article dated Aug. 8.

http://www.forbes.com/sites/merrillmatthews/2016/08/08/the-justice-department-fights-health-insurers-trying-to-survive-the-obamacare-wasteland/#2dde228f5bd4

It's interesting that many industry analysts and political pundits cannot agree what effect if any these pullouts will have. Everything from it won't cause hardly any impact to these pullouts being as some of the surest signs of the inevitable collapse of the ACA. Even though some have accused the "large" insurance companies of engineering the losses and threatening to leave the exchanges as a way to get subsidies they believe they were promised if they lost money, I discount those claims given that 16 of the 23 nonprofit co-ops are going under. Everyone agree's that the risk pool in the ACA exchanges is not balanced, that the healthy, especially young adult (i.e. older than 26 but younger than 35) are not enrolling in the numbers hoped for.

**Do_I_Not_Like_That**

This might not be popular, but go for it America. Nationalise your health service, and put an end to this nonsense of corporate bully boys trying to lay down the law.

You don't have to adopt our model, because there are a ton of good health care systems in Europe, but I think it could work in the USA.

The familar argument against this is choice, and no way is the government taking my money and so on and so on...

But you're having to spend money on health care anyway, so cut out the middle man, and the government or the state takes money off you anyway for tax., so handing over money to the government is hardly a new thing in the USA..

In the UK, the NHS is funded by National Insurance contributions that are deducted from your pay, and if you want private, you can still go private...

Our NHS is not perfect, there are problems, and there would be problems in an American version, that's life...

But there are advantages, especially when it comes to bulk buying drugs and vacinations for vacination problems...

There will be red tape, but I figure if you as a nation spend more on healthcare than any other nation on earth, and yet, you find yourself in the middle of the tablewhen it comes to comparing health care systems between countries,

Then you may as well try something different, becuase the status quo is ripping of the many, and enriching the minority...

**Prestor Jon**

It was blatantly obvious that the ACA and exchanges weren't going to work from the start. This gamesmanship on Aetna's part to try to force DOJ to approve the merger is just a byproduct of the situation created by fundamentally flawed legislation.

**Vaktathi**

kronk wrote:
Vaktathi wrote:
One would think a threat like this would incur an anti-Trust investigation of company officers pretty much right off the bat. If I were the DoJ, that's what my go-to response would be to a threat like that.

That's probably how I would lean. "Don't poke the bear" and all that...

Thats kinda what I was thinking. I'd want to play ball in this situation, particularly with what is shaping up to be a democratic landslide of an election led by a candidate who's backed a single payer system for decades...

Do_I_Not_Like_That wrote:
This might not be popular, but go for it America. Nationalise your health service, and put an end to this nonsense of corporate bully boys trying to lay down the law.

I have a feeling if Aetna follows through on its threat to pull out and Hillary wins a landslide election, then they'll have given the gov all the political ammo they need to do just this with a President who will take great glee in pushing for it.

**whembly**

Here's the thing...

These insurance companies who participated in the ACA exhange want a captive market where people were forced to buy their policies. Plus, there were beliefs that they'll be backed by the government, similar to Fannie Mae in the mortgage industry.

Well... that didn't happen.

So don't feel bad for them.

When Aetna loses $200 million in the second quarter on the exchanges... the only rational business decision is to merge with other exchange participants to maximize efficiencies... or to simply get out.

Critics of ACA has been right since day one.

Time to neuter the ACA ya'll.

Automatically Appended Next Post:

Vaktathi wrote:

Do_I_Not_Like_That wrote:
This might not be popular, but go for it America. Nationalise your health service, and put an end to this nonsense of corporate bully boys trying to lay down the law.
I have a feeling if Aetna follows through on its threat to pull out and Hillary wins a landslide election, then they'll have given the gov all the political ammo they need to do just this with a President who will take great glee in pushing for it.

Won't be able to do that w/o control of the House.

**Vaktathi**

For right now, yes. If Hillary gets elected however, I'd expect she will hold the office for 8 years, during which redistricting will come into play again if I'm not mistaken, and may change that state of affairs.

**jreilly89**

This is why we need to get on the level with Universal Health Care. I don't think the ACA was the right move, but feth's sake we need something.

There shouldn't be $400 difference for medication between people on Medicaid and people who pay for insurance. Hence why I'm all for a healthcare system like Canada.

**Lord of Deeds**

Do_I_Not_Like_That wrote:
The familar argument against this is choice, and no way is the government taking my money and so on and so on...

Remember some of the "familiar" arguments are just that because they are hard to refute. For example lack of faith that the government could do a better job given how much of a role they have played in screwing up the market and their track record with the VA.

I think the article below also provides a good summary of the arguements

http://www.medscape.com/viewarticle/851264

There also would be a myriad number of logistical issues that I don't think we could truly comprehend and given the beaucracy that would result from a single payer system, would likely multiply.

Do_I_Not_Like_That wrote:
But you're having to spend money on health care anyway, so cut out the middle man, and the government or the state takes money off you anyway for tax., so handing over money to the government is hardly a new thing in the USA..

You are just changing one middle man for another, i.e. instead of multiple private businesses as the middle men (that you can pick), you have one, monolithic middle man, the US gov't.

Do_I_Not_Like_That wrote:
In the UK, the NHS is funded by National Insurance contributions that are deducted from your pay, and if you want private, you can still go private...

I already have money deducted by the gov't from my paycheck for health insurance that I don't qualify for because I make too much money (I am solidly middle class btw) or not old enough to qualify for, i.e. medicaid/medicare. I also have money deducted from my paycheck for my private medical insurance which is cheaper and offers better benefits than what I could possibly get through the ACA exchanges (yes I did check).

Do_I_Not_Like_That wrote:
Our NHS is not perfect, there are problems, and there would be problems in an American version, that's life...

Sounds like the rationale that may would come up in the discussion held by the infamous death panels...sorry no cancer treatment for you...but hey that's life

Do_I_Not_Like_That wrote:
But there are advantages, especially when it comes to bulk buying drugs and vacinations for vacination problems...

I'm not so sure given how inflated the cost is of anything the government buys as the result of the convoluted procurement process. Just ask the US military how much they pay for commonly available items such as tools and toiletries because of gov't procurement requirements. I am hard pressed to think of something that gets cheaper when the US Gov't buys stuff.

Do_I_Not_Like_That wrote:
There will be red tape, but I figure if you as a nation spend more on healthcare than any other nation on earth, and yet, you find yourself in the middle of the tablewhen it comes to comparing health care systems between countries,

Hard to compare a health care market for a country like the US (Geographically and hugely diverse, 350 million people, various and differing state regs and dramatic difference in cost of living....) with other countries.

Do_I_Not_Like_That wrote:
Then you may as well try something different, becuase the status quo is ripping of the many, and enriching the minority...

Viva la Socialism /Venezuela

By the way this is not a knock on the NHS or anyone who lives in a country with a single payer system as apparently it work for those countries (

), but just an attempt to point out why I think a single payer system is not the easy go to solution for the US that some would make it out to be.

**Prestor Jon**

Vaktathi wrote:
For right now, yes. If Hillary gets elected however, I'd expect she will hold the office for 8 years, during which redistricting will come into play again if I'm not mistaken, and may change that state of affairs.

Redistricting happens on the state level and only the states governed by the Voting Rights Act need DOJ approval for it. What happens with redistricting is dependent on which party controls your state house.

Automatically Appended Next Post:

jreilly89 wrote:
This is why we need to get on the level with Universal Health Care. I don't think the ACA was the right move, but feth's sake we need something.

There shouldn't be $400 difference for medication between people on Medicaid and people who pay for insurance. Hence why I'm all for a healthcare system like Canada.

Biggest problem is that the Congress that is full of people that thought it was a good idea to require young people to buy insurance in order to offset giving sick/unhealthy people guaranteed access to insurance while simultaneously allowing healthy young people to stay on their parents' health insurance plan until they were 27 years old. That kind of oxymoronic thinking/planning is what causes debacles like this to happen. And if you thought there was a lot of partisanship, obstructionism and back room dealing for the ACA wait until Hillary is president with a Republican controlled Congress. I'm pretty sure it would be literally impossible to get both Parties to cooperate and create a better system anytime in the next 4 years.

**LordofHats**

While I get that Aetna is a for profit business, it is a for profit business that is now holding millions of innocent people hostage because its not getting its way. That's some fine corporate citizenship right there (hello future example of how the health care industry is legal extortion!) Mega-mergers need to stop, and American anti-trust laws need to be enforced with some back bone. The DOJ is doing what it thinks it should do, Aetna is doing what it thinks it should do. Works out hopefully.

Vaktathi wrote:
For right now, yes. If Hillary gets elected however, I'd expect she will hold the office for 8 years, during which redistricting will come into play again if I'm not mistaken, and may change that state of affairs.

Its also looking increasingly optimistic that the GOP can hold Congress imo. The Presidential race has an actual trickle down effect that isn't imaginary, and if Trump tanks it hard enough it could effect the party's broader prospects come November. Even if they hold on in November, if Hillary wins I don't see the party putting up a good candidate in Trumps wake, not just in another four years but as much as 12 years, which will further tank the party's ability to hold office in Congress, and the states.

**jreilly89**

Prestor Jon wrote:
I'm pretty sure it would be literally impossible to get both Parties to cooperate and create a better system anytime before the sun burns out

Fixed that for you

**JohnHwangDD**

IMO, Aetna did the right thing. They are not a charity, and if they don't have the economy of scale from the merger, then it's only rational to exit those markets where they are losing money. Whoever remains will have less competition, and can charge more, becoming profitable. That's a straight business decision there, no matter how HuffPo wants to frame it.

**skyth**

It's a bit of a business decision and a bit of a temper tantrum. Neither of which are good things when you're dealing with health care.

**d-usa**

JohnHwangDD wrote:
IMO, Aetna did the right thing. They are not a charity, and if they don't have the economy of scale from the merger, then it's only rational to exit those markets where they are losing money. Whoever remains will have less competition, and can charge more, becoming profitable. That's a straight business decision there, no matter how HuffPo wants to frame it.

On the other hand, eliminating competition so you can charge more is also the kind of thing that the laws are meant to prevent.

**Prestor Jon**

d-usa wrote:
JohnHwangDD wrote:
IMO, Aetna did the right thing. They are not a charity, and if they don't have the economy of scale from the merger, then it's only rational to exit those markets where they are losing money. Whoever remains will have less competition, and can charge more, becoming profitable. That's a straight business decision there, no matter how HuffPo wants to frame it.

On the other hand, eliminating competition so you can charge more is also the kind of thing that the laws are meant to prevent.

Isn't that why we have state insurance boards that regulate the industry and require that companies submit all proposed price hikes and supporting evidence for them to the boards for approval? It's not like leaving the exchange would let them raise premiums with impunity.

**JohnHwangDD**

Except, that is exactly what capitalism is supposed to do - to remove non-profitable business from the market...

And Aetna isn't doing anything that violates any of the Anti-Trust laws. They weren't buying Humana to reduce competition, they were buying scale so they could continue to compete.

Also, Aetna leaving those exchanges means that whatever increases that were approved simply wouldn't have been enough for them to continue doing business.

The thing that surprises me is that the insurance board didn't simply let Aetna charge whatever they wanted, which is unlike how the overwhelming majority of utility regulators work. Most regulators bend over backward to accommodate the utilities.

**Ensis Ferrae**

Prestor Jon wrote:
d-usa wrote:
JohnHwangDD wrote:
IMO, Aetna did the right thing. They are not a charity, and if they don't have the economy of scale from the merger, then it's only rational to exit those markets where they are losing money. Whoever remains will have less competition, and can charge more, becoming profitable. That's a straight business decision there, no matter how HuffPo wants to frame it.

On the other hand, eliminating competition so you can charge more is also the kind of thing that the laws are meant to prevent.

Isn't that why we have state insurance boards that regulate the industry and require that companies submit all proposed price hikes and supporting evidence for them to the boards for approval? It's not like leaving the exchange would let them raise premiums with impunity.

In theory.... except when commissioners often come from a background where one could surmise a conflict of interest (according to Wiki, the current commish for my state used to be a doctor... yet ALL of the insurance "producers" I worked with hate the guy, and basically assume that he's on the insurance companies' side... they usually went so far as to say he went from working in their companies to working as commissioner)

And While I agree that capitalism is a system that should continue to be used in the US, and operate... I do not think that human health should be for sale.

I think it's high time we seriously look at the UK, Canada, or even the Bismark models for how to effectively construct a healthcare system that treats everyone.

**LordofHats**

JohnHwangDD wrote:
Except, that is exactly what capitalism is supposed to do - to remove non-profitable business from the market...

Not really. That's just a byproduct of capitalist systems. What capitalism is supposed to do is maximize the economic potential of a population under the assumption that the best way to generate wealth is through voluntary exchange, competition, and the personal freedom to use your private property for your own benefit. Non-profitable businesses being removed from the market one way or another is just a byproduct of what capitalism is supposed to do. Arguably, the entire idea of health insurance (or even insurance in general) violates the principal of voluntary exchange. The out of pocket costs of healthcare are too severe for most people to ever afford it. In almost any case having health insurance is universally better than not having it. There is no question as to whether someone wants health insurance, only as to whether they can afford it.

**JohnHwangDD**

Ensis Ferrae wrote:
And While I agree that capitalism is a system that should continue to be used in the US, and operate... I do not think that human health should be for sale.

Human health cannot be for sale, because it is not a rational purchase. Many people are willing to spend nearly unlimited amounts of money to live another day, and this characterizes US Terminal Care.

At some point, we need to be very aggressive in denying care on a national basis, such that "old" people, "sick" people DO NOT GET care, but are simply eased into death as cheaply as possible.

When the US has the balls to get serious about how healthcare dollars are spent, then we'll see reform. And the elimination of US healthcare as we currently know it.

Automatically Appended Next Post:

LordofHats wrote:
JohnHwangDD wrote:
Except, that is exactly what capitalism is supposed to do - to remove non-profitable business from the market...

Not really. That's just a byproduct of capitalist systems. What capitalism is supposed to do is maximize the economic potential of a population under the assumption that the best way to generate wealth is through voluntary exchange, competition, and the personal freedom to use your private property for your own benefit. Non-profitable businesses being removed from the market one way or another is just a byproduct of what capitalism is supposed to do. Arguably, the entire idea of health insurance (or even insurance in general) violates the principal of voluntary exchange. The out of pocket costs of healthcare are too severe for most people to ever afford it. In almost any case having health insurance is universally better than not having it. There is no question as to whether someone wants health insurance, only as to whether they can afford it.

Aetna choosing not to waste their capital on a losing venture is Capitalism 101.

**SickSix**

Why can't States handle healthcare how they want?

Why does every issues have to have a federal solution?

If California wants a Single Payer system then let them have it.
If Florida wants private health insurance let us have it.

I really don't understand what is wrong with that.

**d-usa**

Part of the problem is that people travel, employers cover multiple states, economy of scale, etc.

**whembly**

d-usa wrote:
JohnHwangDD wrote:
IMO, Aetna did the right thing. They are not a charity, and if they don't have the economy of scale from the merger, then it's only rational to exit those markets where they are losing money. Whoever remains will have less competition, and can charge more, becoming profitable. That's a straight business decision there, no matter how HuffPo wants to frame it.

On the other hand, eliminating competition so you can charge more is also the kind of thing that the laws are meant to prevent.

Nothing is stopping Aetna from leaving the exchange.

Automatically Appended Next Post:

SickSix wrote:
Why can't States handle healthcare how they want?

Why does every issues have to have a federal solution?

If California wants a Single Payer system then let them have it.
If Florida wants private health insurance let us have it.

I really don't understand what is wrong with that.

Very hard to do...

Colorado is trying to go to single payer... but, every analysis from both sides agrees that taxes has to go waaay up in order to be viable.

**Chongara**

If you're gonna drop out, drop out. Whatever that's fine, they have the right. If you're not turning a profit you're welcome to stop providing the service;. What you don't do and what rubs me the wrong way is, trying to strong arm the government into exempting you from regulatory oversight on threat of pulling support from their programs. Calling extortion would be the polite way of doing things.

If the world was a fair place all of the company's assets would be immediately seized and ownership fully forfeited to the government. Everyone within 2 degrees of the c-suite would be looking at their personal assets being seized and 40-Life. The world isn't a fair place though and I'm sure the government and the interests of the people it supposedly represents will be bending over backwards to beg forgiveness from those we were wronged by.