Why an Insurance Company Would Stop Offering Coverage

Approximately one month ago, news sources covered the story of Aetna insurance pulling out of the state of Virginia.  The story, of course, revolved around how many residents in the state would be left with only one possible insurer option.  For many of those individuals and families, that meant a drastic increase in the premiums paid to maintain an insurance plan with high deductibles and co-pays.

However, there was more to the story.  Why would an insurance company pull out of such a large market?  Aetna was founded in 1853.  It has a long history of offering health insurance to the American population. It was a million-dollar organization in 1865.  That’s the equivalent of $14 million dollars today.  In 2016, the company earned a total of $2.9 billion.  Last year, the company provided health insurance to approximately 23.1 million people.  There are more than eight million people living in the state of Virginia, and that number has been steadily increasing since 1940.  So, why would the company pull out of a state with a population matching 36% of its annual healthcare business?

According to the company report, the decision to leave Virginia was made after it was determined that they would stand to lose as much as $200 million in the individual insurance market this year.  This is a consistent theme among the insurers making similar decisions throughout the country.  They continue to cite financial losses and uncertainty in Washington D.C. as reason for them to leave certain markets.  What does that mean?  Part of the ACA was the promise of government funding to reduce the cost of individual insurance policies.  However, there has been continued talk about tying that funding to the government spending bill.  If that happens, and the bill doesn’t pass, the funds may not be paid out to companies like Aetna.  Some, like Aetna, have already started to pull out, but if those payments stop, the vast majority of the insurers are threatening to do the same.

I think this one crosses back and forth between Aetna pulling out of the ACA exchange in Virginia and pulling out of the entire state.  I don’t believe that they have stopped offering employer-based insurance, Medicare Advantage or individual plans outside of the exchange program.  Maybe drop this off the list.

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