Aetna pulls out of Obamacare exchanges in Maryland – can’t operate at a loss

Left-leaning Reuters reports on the implementation of Obamacare in Maryland.


Aetna Inc pulled out of Maryland’s health insurance exchange being created under President Barack Obama’s healthcare reform law after the state pressed it to lower its proposed rates by up to 29 percent.

Under the law, often called Obamacare, each U.S. state will have an online exchange where Americans will be able to buy insurance plans, starting on October 1. The government is counting on about 7 million people to enroll next year for this insurance, many of whom will qualify for subsidies.

The success of the exchanges, as well as the expansion of the government’s Medicaid program for the poor, are key elements in the political battle between Republicans and Democrats. State officials say the price of the new insurance plans will help determine whether enough people sign up.

In an August 1 letter sent to the Maryland Department of Insurance, Aetna said the state’s requirement for rate reductions off its proposed prices would lead it to operate at a loss. The rate reductions include products from Aetna and Coventry Health Care, which it bought this spring.

“Unfortunately, we believe the modifications to the rates filed by Aetna and Coventry would not allow us to collect enough premiums to cover the cost of the plans, including the medical network and service expectations of our customers,” Aetna said in the letter to insurance commissioner Therese Goldsmith.

According to online documents, Aetna had requested an average monthly premium of $394 a month for one of its plans and the agency had approved an average rate of $281 per month.

Aetna Chief Executive Officer Mark Bertolini said earlier this week during a conference call to announce financial results that it was closely looking at its plans for the exchanges since buying Coventry.

Like most other large U.S. insurers, Aetna has taken a cautious approach to the new products which must include a broader set of benefits and be sold to all people regardless of their health.

Doug Ross blogged about the cost of health insurance in Ohio a while back. He linked to this article from Forbes magazine.


[O]n Thursday, the Ohio Department of Insurance announced that, based on the rates submitted by insurers to date, the average individual-market health insurance premium in 2014 will come in around $420, “representing an increase of 88 percent” relative to 2013…

[…]It’s called “rate shock,” but it’s not shocking to people who understand the economics of health insurance. In August 2011, Milliman, one of the nation’s leading actuarial firms, predicted that Obamacare would increase individual-market premiums in Ohio by 55 to 85 percent. This past March, the Society of Actuaries projected that the law would increase premiums in that market by 81 percent…

[…]What are the drivers of the increase? According to Milliman, the two biggest drivers are (1) risk pool composition changes, such as forcing the young to subsidize the old, and the healthy to subsidize the sick; and (2) Obamacare’s required expansion of insurance benefits, particularly its mandated reductions in deductibles and co-pays…

Doug makes the point that we already knew what happens to the cost of health care when government imposes price controls – we get a shortage of health care, and prices go up. We knew that. Obamacare is nothing but a further intervention into free market to impose more price controls. Guess what? It’s going to do the exact same thing. The only way out of this mess is going to be for government to ration care by reducing the number of doctors and delaying treatment with waiting lists – exactly what happens today in Canada.

During the election campaign, Obama promised everyone that his health care policy would result in lower premiums. What reasons did we have to believe him when he said that? Did he have a record of competence on health care policy, like Louisiana governor Bobby Jindal does? Did he have a career in private sector health care to draw on, like Mark Bertolini does? No. Obama had nothing but talk. And we were too busy watching television to care.

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2 thoughts on “Aetna pulls out of Obamacare exchanges in Maryland – can’t operate at a loss”

  1. This is like a raging ocean or a tornado….how did big brother become so strong right under our noses???????


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