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from the dancing-elephants-are-hard-on-the-ants dept.
Submitted via IRC for crutchy with a story from Ars Technica.
Following on the heels of UnitedHealth group and Humana, insurance giant Aetna plans to "dramatically slash its participation in the public insurance marketplace" — "claims losses alone spurred decision, but there are clear links to merger."
[...] In 2017, Aetna will only offer insurance policies in 242 counties scattered across four states—that’s a nearly 70-percent decrease from its 2016 offerings in 778 counties across 15 states.
[...] In April, Mark Bertolini, the chairman and chief executive of Aetna, told investors that the insurance giant anticipated losses and could weather them, even calling participation in the marketplaces during the rocky first years “a good investment.” And in a July 5 letter (PDF) to the Department of Justice, obtained by the Huffington Post by a Freedom of Information Act request, Bertolini explicitly threatened that Aetna would back out of the marketplace if the department tried to block its planned $37 billion merger with Humana.
[Continues...]
From the July 5 letter:
[...] We have been operating on the public exchanges since the beginning of 2014 at a substantial loss. And although we have been working to improve our operations over the last 2 ½ years, we are challenged to get to break even this year and it will be some time before we recoup our investment (including a return on invested capital in the exchange business). As we add new territories, given the additional startup costs of each new territory, we will incur additional losses. Our ability to withstand these losses is dependent on our achieving anticipated synergies in the Humana acquisition.
[...] We have consistently indicated to our investors that the public exchanges and the ACA small group business remain risks to our achieving our financial projections since these markets face significant hurdles as outlined above. Should the deal be blocked the challenges will be exacerbated as we are facing significant unrecoverable costs including carrying costs of the debt required to finance the deal [...] and significant unrecoverable transaction and integration costs. We currently plan to cover the above costs, as well as invest in capabilities, improve benefits, pass savings through to members and customers and expand our business using [...] synergies we expect to obtain through the transaction. If we are unable to close the transaction we will need to recover those costs plus a breakup fee and [...] litigation expenses if the DOJ sues to enjoin the transaction.
[...] 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 break- up 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 Ars Technica article continues:
Sixteen days after the letter was penned, the DOJ moved to block the merger. In announcing the department’s decision to file suit, Attorney General Loretta Lynch said it “would leave much of the multitrillion health insurance industry in the hands of just three mammoth companies, restricting competition in key markets.”
In interviews this week, Bertolini has brushed off the tie between marketplace participation and the merger deal, reiterating that the cuts were all based on finances. “As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision,” Bertolini told The New York Times . He noted that the company faced “a second-quarter pretax loss of $200 million and total pretax losses of more than $430 million since January 2014 in our individual products.”
But Obama allies weren't buying the explanation. In a Facebook post, Senator Elizabeth Warren (D-Mass.), noted that Aetna has the right to fight the DOJ on the merger. But, she said, “the health of the American people should not be used as bargaining chips to force the government to bend to one giant company’s will.”
[To start the discussion: What if, in those exchanges where no insurer chose to provide coverage, people would be permitted to enroll in Medicare? -Ed.]
(Score: 5, Interesting) by meustrus on Sunday August 21 2016, @03:41AM
There is one major point in all of this that probably isn't what the regulators considered: Aetna made a threat to the operation of the government based on its market share. And its threat was aimed at gaining an even larger market share. Under no circumstances should a privately held corporation be in the position to make threats against the law and its agents (the government). By proxy, that is making a threat to every American citizen. This is the clearest "smoking gun" I've seen of the trend towards corporations claiming big government power over the actual big government, free from politics threatening to clear house when the governed are unhappy. It's past time to stop these mergers from happening. It's time to break up ALL the big corporations so that the only reasonable response to this kind of threat is "go fuck yourself".
If there isn't at least one reference or primary source, it's not +1 Informative. Maybe the underused +1 Interesting?
(Score: 2, Interesting) by khallow on Sunday August 21 2016, @08:59AM
Under no circumstances should a privately held corporation be in the position to make threats against the law and its agents (the government). By proxy, that is making a threat to every American citizen.
No, that's a terrible idea. First, businesses should be able to threaten every American citizen as long as they don't break any laws in the process. Here, it's a vague "we won't play ball, if you don't give us more ball" threat. That's freedom of speech. Closely related to that, if government can shut down a business for such vaguely threatening talk, then they can do that to anyone and they'll rapidly cease to be a proxy for every American citizen as they pursue their own agenda instead. And come to think of it, it's healthy for the citizenry to be told "Fuck you" every so often when the public tries directly or via government to stifle lawful activities. But maybe we should go back to punishing gays because the public thinks they're bad, icky people. What's good enough for dealing with Aetna, is good enough for dealing with the many undesirable groups in the world.
Second, we should wonder why that is even considered a threat, much less a threat that might work. In a healthy market, competitors would already be using those words to steal away customers. And if Aetna carried through, it'd be blood in the water as competitors scoop up Aetna's customers like sharks plowing through a dense school of fish.
It's only when the market is fucked up that such threats have even a shred of credibility. So then, we should be asking who fucked up the market. It's the same government that you care about so much because they supposedly are a proxy for the citizens of the US.
Finally, business is an important counterweight to government. It's worth noting that every democracy has a variety of divisions of power. Most of these are formal, such as explicit division of executive, legislative, and judicial power which is near universal in democratic societies. The division between business and government is an important one. When we let government win every conflict with the business world, we open the door to traditional fascism with nominally private businesses still operating at the beck and call of government.
(Score: 2) by meustrus on Sunday August 21 2016, @08:15PM
First of all, nobody's talking about shutting down any businesses. Splitting them up, sure, but only at the point where a non-government organization has the clout to do government-like functions. That's the real problem here. See, the great thing about capitalism is that a bunch of different corporations can tackle the same problem in different ways, and we as consumers get to pick what we think is best. But after these corporations have solved the actual problem, they go into competition mode. Healthy competition is producing a better product than your competitors, for a better price, with a better public image. Unhealthy competition is edging competitors out of supply chains, leveraging greater assets to loss-lead so that no competitor can turn a profit, and rigging the game by changing the government regulations such that only you can meet them effectively. And whether the competition is healthy or unhealthy, at the end of it all you have fewer companies with less possibility for startups to disrupt the market. Then, with no more ways to make their operations better, the few companies left start merging with each other to further increase efficiency. Then capitalism breaks down as there is no longer any competition and the few top dogs can keep little guys out of the market completely with those unhealthy competitive practices I mentioned earlier.
Health insurance is one industry with this problem. The biggest problem, really, is how massively expensive medical care is. And it doesn't have to be. There was another commenter on this story talking about the three different prices ranging from ~$20 to ~140 for three $2 bags of saline, among other things. We're overspending on healthcare, and for what? Why is it so expensive to provide healthcare in America? It's the Matryoshka doll of bureaucracy around insurance and regulatory requirements.
So who do you think wanted all that bureaucracy? Some evil collective of government workers? No! The health insurance companies themselves wrote most of the laws that they operate by. And even if they didn't, it would be Congress, not the power-hungry office drones we are so fond of despising. Congress who, in a world without corporate lobbyists, would have literally nothing to gain from writing bad laws. The best thing that come to a politician from writing burdensome regulations benefiting the big dogs in an industry is to then become a highly-paid lobbyist for that industry.
Which comes back around to my primary point: the big dogs in certain industries are too big. They are not being "an important counterweight to government". They are threatening the government. They are writing laws for the government. They are bribing the government. They might as well BE the government, except that you can't elect them out of office. The only thing you can do is split them up until they are too small to have that kind of clout. And if you want government to be smaller, it can't and won't be until the corporations it works with are smaller too.
If there isn't at least one reference or primary source, it's not +1 Informative. Maybe the underused +1 Interesting?
(Score: 0) by Anonymous Coward on Monday August 22 2016, @06:12AM
Wrong about some stuff here.
For starters, one of the major problems with Obamacare (if you were paying attention you should remember this) was that a lot was actually left undefined, and for the executive branch (i.e. the civil servants) to work out, and until those were published, the insurers, hospitals and everyone else didn't really have any clear idea what the rules would be. So, yes, they most emphatically were written by the suits in D.C., and no, the insurers didn't get to simply write that stuff. They could suggest things - well, so could (and did) lots of other people, many of whom were not being painted at the time as the ultimate evil behind the economic slowdown.
All the handwaving about competition is irrelevant in the teeth of the degree of regulation they have to deal with. It's a highly regulated market, very tough to enter, with the government at federal and state level tracking it very carefully. The only free market question here to either the insurers or the public is the flavour of condoms to be used when they get screwed. And, as this whole story makes painfully clear, Aetna got screwed.
Now, as for your fantasy of a high-minded congress if only there weren't no lobbyists? Hah. Tammany Hall was a political machine, make no mistake, but the modern political system is very much a spoils system from the ground up. Why do you think the democrats spend so much time gargling the flavour of union out of their mouths? And the republicans ditto with evangelicals? Or the military? Or inner-city minorities? Or Iowa corn farmers? Or any one of a number of other electorally important groups?
Yeah, if you want congesscritters to be more task-oriented, change the system so that people vote for issues, not people, and that congresscritters are legally liable for disobeying the outcome of an issue vote, with the default vote being NO.
... never happen ....
(Score: 1) by khallow on Monday August 22 2016, @06:56PM
First of all, nobody's talking about shutting down any businesses.
I was responding to:
Aetna made a threat to the operation of the government based on its market share. And its threat was aimed at gaining an even larger market share. Under no circumstances should a privately held corporation be in the position to make threats against the law and its agents (the government).
Then what should be Aetna's consequences for its alleged threat?
Which comes back around to my primary point: the big dogs in certain industries are too big. They are not being "an important counterweight to government". They are threatening the government. are too big. They are not being "an important counterweight to government". They are threatening the government. They are writing laws for the government. They are bribing the government. They might as well BE the government, except that you can't elect them out of office. The only thing you can do is split them up until they are too small to have that kind of clout. And if you want government to be smaller, it can't and won't be until the corporations it works with are smaller too.
You just describe a successful government effort to make a bunch of big market players. Splitting up big businesses, no doubt selectively, (or for that matter small businesses which get political bothersome or don't contribute enough bribes) is a form of shutting down that business (especially, if the pieces just end up in the hands of other large competitors for a cheap price). Perhaps, we shouldn't expect the party making the problems to fix them?
And I strongly disagree that small businesses are a precondition for small government. The US government was able to pass such onerous, big business-creating regulation in the first place because it was big. Currently, they're writing regulation faster than anyone can read it and the rate of creation is going up. In a few decades, regulation creation will be faster than you can flip the pages. No way that small businesses can thrive in such an environment.
(Score: 1) by khallow on Monday August 22 2016, @07:01PM
(Score: 2) by CirclesInSand on Sunday August 21 2016, @10:48AM
Under no circumstances should a privately held corporation be in the position to make threats against the law and its agents (the government).
Private organizations should absolutely be able to defend themselves against government members and their unjust laws. Just because something is legal and carried out by a government member doesn't mean that it isn't theft.
(Score: 2) by meustrus on Sunday August 21 2016, @07:43PM
meustrus:
CirclesInSand:
Somehow I don't think we're talking about the same thing.
If there isn't at least one reference or primary source, it's not +1 Informative. Maybe the underused +1 Interesting?
(Score: 2) by CirclesInSand on Monday August 22 2016, @10:51AM
That's because you misquoted yourself. You said "be in a position to make threats", not "make threats". One is an ability; the other is an act of communication.
(Score: 1, Informative) by Anonymous Coward on Sunday August 21 2016, @05:27PM
Read their communication again. Carefully, this time.
Government: you have to offer the following kinds of policies if you are in these markets, because of Obamacare
... time passes ...
Aetna: We tried. We're losing money hand over fist. We want to have a merger, maybe improve our situation.
Government: Maybe. Probably not.
Aetna: Look, if we can't merge, we can't make money, we have responsibilities here, we'll just have to drop out of this market to stop bleeding cash.
Government: No. No merger. Also: fuck you.
Aetna: Welp, looks like option B, leaving the market, is on the cards.
Witless masses: Oh noes! Teh ebil corpomoration hatez peepulz!
Reality: The terms of Obamacare aren't working there. Aetna is under no obligation to participate, so they're not. Nothing to see here.
(Score: 2) by meustrus on Sunday August 21 2016, @07:41PM
That much has nothing to do with anything but capitalism. Obamacare got nothing to do with it. In fact, if it's so unprofitable, I find it hard to believe that a merger would make a difference to them staying in the market. And fun fact: health insurance is incredibly profitable, and it only exists as an industry because of government regulation.
If there isn't at least one reference or primary source, it's not +1 Informative. Maybe the underused +1 Interesting?
(Score: 0) by Anonymous Coward on Monday August 22 2016, @01:44AM
Oooh, is that a fun fact? I love me some fun facts! I can play this game too!
Just because "health insurance is profitable" does not in any way imply that any individual health insurance plan, or set of plans, or market, is inherently profitable.
Did you get that? It's a subtle point, but it's quite possible for the health insurance industry to be a profitable one on average, while certain products in that market are not profitable.
That's what happened here: Aetna provided policies according to the dictates of Obamacare, and within the limits dictated, within certain markets, they could not find a way to make them profitable. Given that this continued over the course of years, not just a morning's smoke session, it's a pretty fair bet they tried. And failed. The numbers behind the failure are now public.
OK, so much for the basic fun facts. Now let's have another fun fact! Mergers result in changes in the market position. This may sound like Walmart-style squeezing of everyone else, but there's something special about the insurance industry: the creation of a larger, and more diverse risk pool. So, here's another fun fact: there's every reasonable reason to believe that, if they had had their merger, they might have been able to cut a profit on those policies and continue offering them! Oooh, that was fun!
Oh, and let's have another fun fact (since I'm having more fun than a barrel of inebriated monkeys) and observe that health insurance has existed as a product since before a government willed it into existence. Obamacare policies exist because of government fiat, but health insurance as an industry does not.
This is so much fun it might not even be legal, but who's gonna stop me? You? Didn't think so.
Because another fun fact (isn't this crazy?) is that this is precisely the sort of thing that was predicted: companies would have a hard time cutting a profit, and just stop offering policies, while the ones who did remain in would end up with monopoly power, and massive, chunky premiums (assuming that the government let them). And whaddyaknow? (fun fact alert!) the premiums have been rising. Nationwide, they have risen substantially, and in fact since inflation is dancing a tango with 0% that means health care costs have continued to beat inflation, year-on-year, despite all the earnest promises that Obamacare would totally control costs. Oh boy, another fun fact: the number of provisions in it that had a credible attack on cost rises? Nil. Again, as seen on TV, whenever they talk about that. Oh, wait, TV rarely talks about that because it's boring and makes the government pout. Oh well!
It gets yet funner (is that a word? It sounds like a fun word, so it totally should be!) when you remember that the health care market has both supply and demand ends, and that the supply end is continually growing as new products come to market (new drugs, prosthetics, procedures, you name it!) and yet also under pressure (lack of new MDs, rapid retirement of old MDs who are tired of the new BS, hospitals and clinics being closed, merged and redeployed under the new rules, you name it) in terms of ability to provide for that supply.
Wait, let me put on my moustache tattoo and fedora. "I believe that your pocket analysis, despite being heartfelt, is simplistic and elides certain critical factors."
What fun!