Aetna announced that as of July 1, 2013 they will no longer accept new applications for individual and family plans (IFP) for coverage in California. All individual and family plans will close as of December 31, 2013. Members currently enrolled in their IFPs, known as Advantage Plans, can still add family members subject to medical underwriting, but the families can no longer switch to another plan to save money or for added benefits. Aetna will continue their small and large group presence in California.
Aetna can’t or won’t be competitive
Aetna hinted in their announcement that a combination of the new health insurance exchange and required benefits forced them to pull the plug on their individual plans. In recent years, Aetna has never been very competitive in terms of price with other carriers such as Anthem Blue Cross, Health Net and Blue Shield of California. Their lack of competitiveness put them in fourth place in individual health market share in 2011 with 5.2% of the market.
High price leader
Perhaps because their market share was so small, the customer service for members and agents always seemed to be pretty good. But Aetna has always been a hard sell with clients because their premiums for equivalent plans have always been 10% – 20% higher, or more, than the least expensive comparable plan on the market. Blue Shield of California has crept up in price close to Aetna and I have seen sales suffer because of it. But unlike Aetna that chose not to offer plans through the state health insurance exchange Covered California, Blue Shield bid to offer plans and was accepted.
Let other insurers absorb initial losses
It could be that Aetna saw a good chunk of their IFP business migrating to the exchange and putting them in a weakened position to support a dwindling membership base. By exiting the individual market in California, Aetna has decided not to develop plans to compete outside of the exchange. Aetna may be following United Healthcare’s lead by not participating in the individual market or the exchanges preferring to let others cover those uninsured individuals that may require expensive medical treatments and incur high claims.
Obesity is to blame
Aetna has not been happy that healthcare reform legislation has put so little emphasis on reducing the cost of healthcare services. The services that they have to negotiate over with doctors and hospitals and pay the claims. They went so far as to blame obese people as a driving factor for the high price of healthcare. In this vein, Aetna will not be happy that the American Medical Association has voted to recognize obesity as a disease opening the door for insurance companies to pay for treatment.
Profits before people
Aetna is driven by profits. Once California’s residents without insurance and need care have been stabilized and no longer represent a high risk for loss, Aetna and other insurers will probably come back into the market. Under the emergency regulations approved for the individual market, all insurers have to offer the same benefits. It is a level playing field. But big profitable insurance companies like Aetna, UHC and Cigna will let others blaze the trail of healthcare reform in California. May those trail blazers be rewarded with loyalty by members in the coming years.
Text of broker announcement of Aetna leaving the California market
Effective July 1, 2013, Aetna will no longer offer Aetna Advantage Plans for Individuals, Families and the Self-Employed in California.
California applications (online or paper) received by our underwriting department requesting anAugust 1, 2013 or later effective date will be closed and the applicants will be notified via mail. Any California applications in process as of June 24, 2013, regardless of requested effective date, will be closed and the applicants notified via mail.
Why are we making this change?
After reviewing our individual health insurance plans in California, we determined we can no longer meet our customers’ needs and remain competitive in that market. A number of factors were considered in making this decision. While it was a difficult decision, in keeping with the best interests of our customers, we believe there are other insurers that can better meet their needs.
Impact to existing members
- Coverage for all California Aetna Advantage Plans will end as of December 31, 2013.
- If a member wishes to terminate their coverage prior to the dates noted above, they can contact the member services phone number on the back of their ID card.
- Members do not need to take any action at this time. They will be able to maintain coverage under their current Aetna policy until December 31, 2013.
We will continue to allow existing Aetna Advantage Plan members in California to add spouses and dependents to their plans subject to medical underwriting and applicable law. However, existing members will not be able to change plans.
How will individual members be notified of this change?
All existing policyholders will be notified by mail on or about June 20.
While we will continue to administer their individual health insurance plan until the date noted above, policyholders are strongly encouraged to seek alternative health insurance coverage prior to their policy termination date to avoid a lapse in coverage.