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Grim outlook for health insurance exchanges

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Humana's planned exit strikes another blow against ACA

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WASHINGTON — Humana Inc.’s decision to pull out of the health insurance exchanges created by the Affordable Care Act threatens to cripple Obama­care before Republican lawmakers bent on its repeal can cobble together a ­replacement.

The Humana decision came one day before the Trump White House issued a proposed rule that attempts to offer insurers more incentives to participate in ACA’s individual exchanges. The president earlier had issued an executive order effectively gutting the individual mandate.

Humana had reduced its participation in the exchanges this year after suffering losses on individual plans, which make up a relatively small percentage of the insurer’s business.

The company issued a statement explaining the reasons for its action: “Humana has worked over the past several years to address market and programmatic challenges in order to keep coverage options available wherever it could offer a viable product. This has included pursuing business changes, such as modifying networks, restructuring product offerings, reducing the company’s geographic footprint and increasing premiums.

“All of these actions were taken with the expectation that the company’s individual commercial business would stabilize to the point where the company could continue to participate in the program. However, based on its initial analysis of data associated with the company’s health care exchange membership following the 2017 open enrollment period, Humana is seeing further signs of an unbalanced risk pool. Therefore, the company has decided that it cannot continue to offer this coverage for 2018.”

The decision means Humana will exit 11 state marketplaces next year, with a potentially devastating impact on people insured under the ACA in certain regions. For instance, Humana is the only insurer offering exchange plans in 16 counties surrounding Knoxville, Tenn., and its departure will leave 40,000 people without an insurance option.

Many of the state exchanges are already highly vulnerable. According to the Kaiser Family Foundation, 43% of enrollees under the ACA have only one or two insurers to choose from, and 32% of counties in the United States have only one exchange insurer, a dramatic increase from 7% in 2016.

In an interview the same day that the Humana decision was announced, Aetna Inc. chief executive officer Mark Bertolini stated that Obamacare is in a “death spiral” and predicted that there will be many markets with no exchange insurers next year. He further suggested that 2019 could be the earliest year that effective measures to stabilize the marketplaces can be implemented.

Aetna, he added, has not yet made a decision about its 2018 participation in the ­exchanges.

The Trump administration’s proposed rule would shorten the open enrollment period, give states greater authority to review the adequacy of health plan networks and require eligibility verification for people purchasing insurance outside the official sign-up period.

“These are initial steps in advance of a broader effort to reverse the harmful effects of Obamacare, promote solutions to improve access to quality, affordable care and ensure we have a health care system that best serves the needs of America,” said Tom Price, secretary of Health and Human Services. Price was an outspoken foe of the ACA while serving in the House of Representatives.

The White House proposal was praised by a number of insurance executives as a step in the right direction, but one that does not go far enough to stabilize the insurance markets. Like Humana citing an “unbalanced risk pool,” several large insurers have withdrawn from the marketplaces this year, pointing to higher-than-expected costs as enrollees included too many people with medical problems and too few healthy people.

That imbalance is precisely what the individual mandate was intended to prevent, but the Internal Revenue Service, following President Trump’s January 20 executive order requiring federal agencies to “minimize … the economic and regulatory burdens of the act,” quietly notified tax preparers and software firms early this month that it will not automatically reject tax returns that do not state whether the filer had health insurance during the year. That action effectively nullifies enforcement of the individual mandate.


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