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Aetna Warned It Would Cut Obamacare if Humana Deal Was Blocked

August 17, 2016, 7:15 PM UTC
Major Providers As Obamacare Insurance Co-Ops Struggling With Cash Flow
Snow covers the roof of Aetna Inc. corporate headquarters in Hartford, Connecticut, U.S., on Friday, Feb. 6, 2015. Obamacare's startup health insurance plans are flirting with financial distress, as all but five of the 23 nonprofit companies had negative cash flow from operations in the first three quarters of 2014, Standard & Poor's said in a report Tuesday. Photographer: Ron Antonelli/Bloomberg via Getty Images
Photograph by Ron Antonelli — Bloomberg via Getty Images

Aetna’s top executive said in a letter to the U.S. Department of Justice during the review of its deal to buy rival Humana that the insurer would exit much of the individual Obamacare insurance market if the agency challenged the merger.

News of the letter came after Aetna said on Monday that it would pull out of selling individual insurance on the government-run websites in 11 states, citing financial losses on the business.

In the July 5 letter, CEO Mark Bertolini said it would be some time before the company recouped the investment it had made over the past 2-1/2 years in the government-subsidized insurance plans created under President Barack Obama’s national health care reform law.

“Our ability to withstand these losses is dependent on our achieving anticipated synergies in the Humana acquisition,” Bertolini wrote, according to a copy of the letter posted on the Huffington Post website, which obtained the document though the Freedom of Information Act.


“Unfortunately, a challenge by the DOJ to that acquisition and/or the DOJ successfully blocking the transaction would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support,” he wrote.

UnitedHealth Group and Humana have cited similar concerns about financial losses on the Obamacare exchanges and have also cut back most of their plans for 2017.

The Justice Department moved on July 21 to block Aetna’s acquisition of Humana and Anthem’s purchase of Cigna, saying the two deals would lead to higher prices.

Bertolini’s letter followed Assistant Attorney General William Baer’s request to Aetna on June 30 for information on the consequences of not completing the deal.

A copy of that document shows the Justice Department asked for data on costs such as the breakup fee; the impact on Aetna’s business strategy, including participation on the Obamacare exchanges; and documents related to a June board meeting and the Humana deal or the exchanges.

Aetna spokesman TJ Crawford said in an emailed statement that since the company submitted the letter to the Justice Department, it had a better view of the business line’s second-quarter performance.

“That deterioration, and not the DOJ challenge to our Humana transaction, is ultimately what drove us to announce the narrowing of our public exchange presence for the 2017 plan year,” Crawford said.