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posted by martyb on Saturday August 20 2016, @08:19PM   Printer-friendly
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.]


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  • (Score: 4, Informative) by AthanasiusKircher on Sunday August 21 2016, @05:25AM

    by AthanasiusKircher (5291) on Sunday August 21 2016, @05:25AM (#390909) Journal

    At any one time the grocery industry is represented by 2 groups of people:

    While creative, your grocery analogy is fundamentally flawed in too many ways to mention. Perhaps most importantly, health insurance companies serve two fundamentally different markets: (1) people who need basic everyday care that they could probably pay for reasonably just by budgeting, and (2) people who need coverage for catastrophic events that are difficult or even impossible to save for. The latter is more like term life insurance or fire insurance or whatever, where the risk is spread out across large pools of people, most of whom won't actually ever use the maximum benefit. There is no analogue to (2) in a grocery business. Moreover, those who need (2) often are in dire emergency straits, without the ability to "comparison shop" as they might in looking at different stores.

    Anyhow, function (1) is not like any other sort of "insurance" in the normal sense. It's more like an "installment plan" or something, or the "constant payment plan" offered by a gas heat company that lets you pay one standard monthly fee every month to even things out so you won't have to deal with the $400 heating bill suddenly in January. That's really not insurance, nor is it really like anything resembling the market for grocery stores. But that's where people deal with "health insurance" on an everyday basis.

    The grocery companies make a "business" and try to make a profit by charging as much as they can to b). However if they get too crazy b) will just go to another a) and everybody knows it, which keeps things more or less in check.

    That statement is absolutely unequivocally false for the U.S. insurance market. Why? Because no one knows what they are really paying for health care. Wait -- let me say that again: NO ONE knows what they are really paying for health care.

    My vote would be either for a system that limited "health insurance" to catastrophic incidents only, definitively separating that coverage from any "monthly gas-bill" like way of distributing your payments for annual physicals and flu shots... and requiring the charges for the latter services to be available upon request to practice medicine. OR, go with single payer, and kill that nasty cobra (no pun intended) that serves little purpose in standing in the way between doctor and patient, while simultaneously reducing the cost of healthcare by maybe 25% by getting rid of the insurance industry. (Or, well, I don't think private supplemental insurance should be outlawed, but with a reasonable single-payer system it should decrease

    That's particularly true in insurance plans with "co-pays," where the actual price billed by the doctor's office and the amount paid by the insurance company for service are dealt with internally. A patient might receive a statement detailing all of those "charges" (the reason for quotation marks will become clear in a moment), but since you already paid your co-pay, all of those numbers are pretty much meaningless to you. It's only on those more rare (and frequently unpredictable) occasions where "coverage is denied" for something that you really need and have to pay out of pocket that you realize the actual cost of anything. And since those things are difficult to sort out except for those who can read the multi-hundred-page annual insurance manual they get with their policy, it's hard to know when coverage will fail. Which means it's difficult to "comparison shop" between plans.

    "But wait," you say, "what about those high-deductible plans many people have nowadays? In those cases, you end up shelling the first $5000-13000 per year out of pocket, so surely you see your 'real cost'??"

    Except you don't. What you see is this weird set of manipulated numbers which involve the numbers the doctor's office claims to "charge" and then the amount your insurance company says they will pay (which is generally a negotiated fee with a discount, which varies depending on your insurance company, what group of policy holders you're in which affects negotiated costs, etc.). So, again, you see a bunch of money transferring, with one party saying "You owe X" and another saying "We paid Y," but you have no clue how that might relate to the amount you might owe or what your insurance company would pay if you had a different insurance company or no insurance at all.

    And it's next-to-impossible to get estimates for healthcare services ahead of time. You might be able to get the standard charge for a doctor's visit with no tests or special conditions in advance. But hospital A might charge four times as much for an out-patient procedure as hospital B, but it's almost impossible to get that information ahead of time, since it doesn't only depend on the actual claimed "charges" the hospital bills, but then what your specific insurance company has negotiated with that particular hospital or hospital network.

    Bottom line: you pay a monthly premium, sure. But it's basically impossible to "comparison shop" among insurance companies or healthcare providers, which make your free-market comparison with grocers very problematic. For a patient to be able to make an informed choice to leave an insurance or choose a different provider, they need to be able to get information about actual pricing and costs, which you can't do.

    And even if you think you know the way your plan is supposed to work, there's no guarantee it will. When I switched to a high-deductible plan a few years back, I thought it was a good decision for a number of reasons. But it also meant I kept a closer eye on my bills that I was paying out of pocket. Except discounts my insurance company said should apply wouldn't necessarily apply. The "free annual physical" with all sorts of specific tests was denied to be covered -- until I went back and forth between my doctor's office and the insurance company with literally a dozen phone calls spread out over 6 months and FOUR TIMES having the claim refiled until I could actually get it resolved. (Actually, in the end, the doctor's office still made an error in coding, so one of my procedures still wasn't covered when it should have been, but they accidently put a double credit on my account for another reimbursed test that landed me about $3 ahead of what I should have, so I just gave up and quit the "medical billing shuffle" while I was ahead. And all of this was over charges for a standard physical with no unusual tests or anything.)

    Imagine if you had grocery "insurance". All of b) would want steak for dinner every night.

    Imagine if you had "single payer groceries". All of b) would want steak for dinner every night.

    You know what? I don't want "steak dinner." I just want a transparent billing procedure and reasonably accessible and accurate cost estimates for non-emergency procedures. If we had those things, we might have something resembling a free market where a consumer can make a rational choice between insurers. We do not. And people on all sides -- doctors/hospitals, insurance companies, and patients -- make unreasonable demands in these situations, because nothing is transparent.

    Insurance and freebies is the problem, not the profit motive.

    Well, this mess we call "insurance" is the problem -- I agree -- due to an extra layer of unnecessary bureaucratic profiteering mucking up stuff in the middle. I have no problem with a doctor earning some money for services. The "profit motive" of the middleman is the problem here, and there's really no good reason for it to be there.

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