Aetna tied Obamacare participation to contentious merger in July

Aetna warned the Justice Department that it would start to bail on Obamacare if the administration blocked its proposed merger with another insurer, Humana, and then followed through on its threat, prompting President Obama’s allies to accuse the company of using its customers as a bargaining chip.

The Connecticut-based company told Justice’s attorneys last month, upon their request, that if the feds moved to spoil the acquisition, the company would be forced to reel in its footprint in the Affordable Care Act’s insurance markets.

“Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint,” Aetna CEO Mark T. Bertolini said in his July 5 letter, which was obtained by The Huffington Post and first reported by the outlet Wednesday.

In late July, the Justice Department formally announced it would try to block the acquisition and another insurance merger, between Anthem and Cigna.

Then this week, Aetna said it was pulling out of 11 of the 15 state exchanges where it had been operating, a stark turnaround from recent plans to expand into new exchanges. The pullback is fueling questions about whether Obamacare can hang on without major changes and giving Republicans new ammunition in their fight to repeal the 2010 law.

But some Democrats are crying foul, saying the timing of Aetna’s pullback seems fishy, after the company appeared bullish about its Obamacare investment earlier this year.

“Aetna may not like the Justice Department’s decision to challenge its merger, and it has every right to fight that decision in court,” Sen. Elizabeth Warren, Massachusetts Democrat, said on her Facebook page. “But violating antitrust law is a legal question, not a political one. 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.”

The company says its moves are strictly about business, not payback. The Justice Department had asked Aetna to explain how the merger related to its participation in Obamacare’s exchanges, so it says it responded with honest assessment of its ability to make money under the program.

Moves to block the acquisition of Humana, Mr. Bertolini said in his letter, would hurt Aetna’s ability to make up the losses it has sustained so far.

“We indicated that there would indeed be an impact, which should not come as a surprise given a loss of deal synergies coupled with a potential break-up fee would raise further questions about sustaining a position in a business where we have yet to break even,” company spokesman T.J. Crawford said Wednesday.

Mr. Crawford said that since Aetna issued its letter in early July, it has gained a fuller picture of losses in the individual market that totaled $200 million in the second quarter and could reach $300 million by the end of the year.

The Justice Department declined Wednesday to comment on the situation.

Larry Levitt, a senior vice president at the nonpartisan Kaiser Family Foundation, said he hadn’t thought that the antitrust case played a role in Aetna’s more negative posture toward the exchanges, “but the timing of this announcement is a bit curious.”

“It seems like Aetna went very quickly from optimism about the future, to reviewing their options, to pulling out of most markets,” he said in an email on Tuesday. “They say they are losing money on the marketplaces, but I expected them to stick it out for another year to see how things go during open enrollment and with the election.”

For now, the company’s decision isn’t sitting well with Democrats, who have championed Mr. Obama’s signature domestic achievement and want it to last far beyond his presidency.

“I’m troubled by reports that this announcement could be in retaliation to the Justice Department’s decision last month to file a lawsuit to block a merger between Aetna and Humana,” said Rep. Frank Pallone Jr. of New Jersey, the top Democrat on the House Energy and Commerce Committee. “Aetna’s CEO had touted the ACA Marketplace as a good investment in April, which raises very serious concerns about Aetna’s sudden change of heart.”