Pulling out of Obamacare an option? Huh!

My inner MBA was piqued when the Aetna CEO talked openly about pulling out of exchanges as an option. Here is what he said in a CNBC interview.

There is so much uncertainty about Obamacare that Aetna, the U.S.’s third-largest insurance provider, may be forced to double its rates or opt out of the program, the company’s CEO, Mark Bertolini, told CNBC on Thursday.

What action Aetna will take is still up in the air, but the company doesn’t plan to set its 2015 Obamacare rates until May 15. Between now and then, though, Bertolini said he’s trying to get the necessary information from the Obama administration to properly price its insurance products.

I think I understand Aetna’s strategy in Ohio where they have opted to not participate in the exchange. Since they are not one of the top two health insurers for the state, they have limited marketing power. It makes sense that they adopted a wait and see strategy toward participating in the Ohio exchange. Aetna’s strategy is important to me. My AARP-Aetna Essential Healthcare plan is scheduled to be canceled in 2014. If the early exchange enrollment data ends up to be better than expected then I think Aetna will participate in the exchange in 2015. If the price is right then I will continue to insure with them. However if the exchange enrollment data is ugly and the government fixes scares Aetna then there is high likelihood that they will pull out of Ohio. Like most people I would like to keep my health insurance plan but I really want the number of insurance companies competing in Ohio to go up not down. More insurance companies competing in the market is probably as close as we get to getting better insurance rates in the next couple of years. On the other hand I understand Aetna’s predicament. The market is telling them to consolidate and focus their efforts on better markets.

What surprises me about Mr. Bertolini’s comments is that he is talking about exiting exchanges in one of those better markets. Let’s be honest here. Aetna has better managers and data than the government. That is just how businesses roll. I cannot help but speculate that his early warning is because the early enrollment data and administrative costs he is seeing is ugly. He goes on to say that Aetna has about four months to figure out how to make money in the exchange market. You cannot say that he didn’t warn us. Although each state will have different results, if Aetna does not think they can be profitable in their strong market states then this does not bode well for weak markets like Ohio. The best I can hope for is the administration will have another panic attack about insurance polices getting canceled and end up telling the insurance companies that they can continue those grandfathered policies for another year.