Aetna Wants Out of NJ’s Individual, Small-Group Health Insurance Markets

Uncertainty about future, as federal officials repeal and replace Obamacare, contributes to the decision

Tens of thousands of Aetna members will likely be forced to find new health insurance next year if the company withdraws from New Jersey’s individual and small-group health insurance markets as planned, triggering what could be the largest single disruption in years.

The decision was prompted by losses in some product lines that reached $450 million nationwide in 2016, officials said. Also playing into the company’s decision: significant uncertainty about the future, as federal officials tinker with the Affordable Care Act in ways that some experts believe could seriously destabilize certain insurance markets.

And some suggest that, with industry executives now struggling to decide what plans to offer in 2018, other insurance companies might soon follow suit. “We are certainly not the first payer to reduce our (individual market) presence and we likely won’t be the last,” said T.J. Crawford, Aetna senior director of media relations, speaking about the nationwide insurance landscape.

Shrinking market

Last year a trio of insurance providers left New Jersey’s ACA exchange — the portion of the individual market in which plans are sold through the federal website to people who qualify for financial assistance with their premium costs — forcing some 71,000 low-income residents to find other coverage in 2017.

At the time, the departure of these carriers — Health Republic Insurance (which was declared insolvent), Oscar Insurance Group, and Oxford Health Plans — prompted renewed calls for a single-payer or universal, government-run insurance system, an idea several Democratic gubernatorial candidates have now embraced.

Aetna has never participated in New Jersey’s exchange, but it insured more than 68,000 people at the end of 2016, including several hundred through the unsubsidized individual market — in which people can buy plans directly from the company, without government help — and the vast majority through plans sold to small companies and other groups. The withdrawal request, which state officials must approve, would not impact the millions of people covered by plans Aetna sells in the large group market, Medicaid and Medicare, or policies for dental or vision care.

While Aetna once participated in 15 ACA exchanges nationwide, it has withdrawn from most and is seeking to leave the two last states this year, Crawford said. In January, a federal judge found that some of Aetna’s decisions were driven not by market concerns but by a desire to merge with Humana, a proposal he rejected.

Transition plan

The company hopes to stop selling new policies in its two Garden State markets by July and has promised to work with state regulators on a transition plan for those who would lose coverage. It has already been reaching out to insurance brokers to warn them of the change. While most of the existing policies are set to terminate at the end of 2017, some may involve multiyear contracts that could extend longer.

Aetna’s presence in the individual market, where it insured 418 people at the end of 2016, represents less than 0.2 percent of the total. In all, seven companies cover just over 300,000 people in total, according to data from the state Department of Banking and Insurance.

But the company plays a far bigger role in the small-group market, where Aetna had just over 12 percent of the market share at the end of 2016, DOBI figures show. At that point they had 7,200 active group policies in place, covering some 67,700 employees and family members. In all, six companies cover more than 430,000 lives in this market.

Crawford, with Aetna, said while the company is looking to leave the individual market, state requirements are responsible for also forcing them out of the small-group sector. “New Jersey is unique in that the small group is linked to the individual market,” he said. (DOBI officials were unavailable late Thursday afternoon to provide additional details on the withdrawal process.)

Garden State officials decided to connect the two sectors as part of a 1992 health insurance reform bill designed to bolster competition in a historically weak independent market. The law implemented the state’s guaranteed coverage clause and prohibited insurance providers from charging more for policies sold to older, sicker patients; both measures have since been replaced by insurance mandates codified in the ACA. But it also required companies that sold small-group plans to also participate in the individual market, or pay a significant fine.

According to DOBI data, fewer than 130,000 people got coverage through the individual market in 2010, many of whom signed up for a bare-bones policy that covered major medical expenses only and came with high out-of-pocket costs. This crept up by a few thousand people a year until the ACA was implemented in 2014, when it jumped to nearly 242,000.

By 2015, the individual sector had swelled to more than 290,000 lives. By the end of the 2016 enrollment period, more than 295,000 people had enrolled — at least a third of them buying products through the exchange with help from federal subsidies.

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