Humana exiting ACA exchanges, individual market in 2018

Humana will be leaving all Affordable Care Act (ACA) exchanges and withdraw all its business from the individual insurance market in 2018, becoming the first major insurer to make a full exit amid uncertainty about the law’s future.

The Feb. 14 announcement came hours after Aetna announced it had mutually ended plans to acquire Humana for $37 billion, a deal that was blocked by a federal judge on antitrust grounds. Humana will receive a $1 billion break-up fee ($630 million after taxes) as a result.

Regarding its marketplace business, Humana said it’s tried several strategies to make exchange plans profitable, including raising premiums, narrowing networks and reducing the number of areas it offered coverage. It claimed none of it has worked.

“All of these actions were taken with the expectation that the company’s Individual Commercial business would stabilize to the point where the company could continue to participate in the program. However, based on its initial analysis of data associated with the company’s healthcare exchange membership following the 2017 open enrollment period, Humana is seeing further signs of an unbalanced risk pool. Therefore, the company has decided that it cannot continue to offer this coverage for 2018,” Humana said.

The insurer had already scaled back its 2017 offerings to 156 counties in 11 states (Florida, Georgia, Illinois, Kentucky, Louisiana, Michigan, Missouri, Mississippi, Ohio, Tennessee and Texas). All of those states utilize the federally-facilitated marketplace, where enrollment did drop in the open enrollment period which ended Jan. 31. The company had about 201,000 customers in individual health plans as of January, including 152,000 in ACA-compliant plans, down from 654,800 individual market customers in 2016.

The most affected areas would be 19 counties in Tennessee where Humana was the only exchange insurer for 2017. There’s no provision in the law to guarantee coverage if no insurer wishes to participate in a given market. Another 60 counties would have only one participating insurer, assuming no other company enters or exits those markets.

President Donald Trump pointed to the exit to bolster his argument to repeal the law, tweeting “Obamacare continues to fail.”

Cynthia Cox, associate director of the Kaiser Family Foundation, said more insurers could follow Humana unless plans for the exchanges and the ACA as a whole are made clear before they have to start submitting plans for regulatory approval in the spring.

“With congressional efforts to repeal the law and HHS Secretary Tom Price's likely administrative changes, insurers face a great deal of uncertainty going into 2018," she said to POLITICO.

Humana does plan to maintain its presence in the group market, as well as continue to offer dental and vision plans. Its long-term strategy is to focus on its Medicare Advantage business and “enhancing” its care delivery strategy, including a greater use of risk-based arrangements.

“As the company’s business model demonstrates, when Humana integrates care with doctors and other healthcare professionals and serves members outside of traditional institutions, its members’ health improves, care is more cost-effective, and consumers are more engaged. These are key drivers to enabling more affordable healthcare for consumers and facilitating higher Star quality ratings, while also improving financial performance,” the company said.