Aetna pulls back on Obamacare health insurance plans in 2017

Aetna Inc, the No. 3 U.S. health insurer, said that due to persistent financial losses on Obamacare plans, it will sell individual insurance on the government-run online marketplaces in only four states next year, down from the current 15 states.

Aetna's decision follows similar moves from UnitedHealth Group Inc. and Humana Inc., which have cited similar concerns about financial losses on these exchanges created under President Barack Obama's national healthcare reform law.

Aetna is also trying to buy Humana and is currently fighting a U.S. government lawsuit aimed at blocking the $34 billion deal.

Aetna, which earlier this year said it was too soon to give up on the exchanges despite its challenges, this month signaled it was reconsidering. On Aug. 2, the company said it would not expand in 2017 and would review all its individual business.

Many insurers last year had said they expected to profit on the exchanges, but now say more exchange rules must be changed for it to be sustainable. Only about 11 million people have signed up through the exchanges, about half as many as expected.

Larry Levitt, healthcare economist at the Kaiser Family Foundation, said that if enrollment stagnates, small technical fixes likely will not be enough to bring big insurers back. "More healthy people need to be encouraged to sign up," Levitt said by email.

Aetna said that the current risk adjustment system, in which the government balances out the costs of sicker than typical populations through payments to insurers, is not adequate.

Aetna said that it had a second-quarter pretax loss of $200 million on the individual business and has lost $430 million since the plans first went on sale in 2014.

Kevin Counihan, Chief Executive of the U.S. government-run individual marketplace, said that the risks of the customer pool is improving.

"It’s no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality rather than by denying coverage to people with preexisting conditions," Counihan said in a statement.

Aetna said it would continue to sell plans on the exchanges in Delaware, Iowa, Nebraska and Virginia in 2017. The plans, which are eligible for income-based government subsidies, will be sold in 242 counties, down from 778 counties this year. States it is exiting include Florida and Ohio.

It will continue to sell individual plans that meet the law's requirements such as not denying coverage to people with pre-existing conditions outside of the exchanges where it does now, the company said.