NEW YORK • Aetna Inc. warned in July that it would exit much of the Affordable Care Act individual health insurance market if the government challenged its deal to buy rival Humana Inc., according to a letter it sent to the U.S. Department of Justice.
The public release of the letter came after Aetna said on Monday that it would pull out of selling individual insurance on the government-run websites in 11 states including Missouri, citing financial losses on the business.
The company’s withdrawal followed similar moves by UnitedHealth Group Inc. and Humana, representing a blow to the marketplace for the government-subsidized insurance plans created under President Barack Obama’s signature health care reform law.
In the July 5 letter, Aetna Chief Executive Mark Bertolini said it would have to cut back because it would be some time before it recouped the investment it had made in this market over the past 2½ years.
“Our ability to withstand these losses is dependent on our achieving anticipated synergies in the Humana acquisition,” Bertolini wrote. A copy of the letter was posted on the Huffington Post website, which obtained the document though the Freedom of Information Act.
“Unfortunately, a challenge by the DOJ to that acquisition and/or the DOJ successfully blocking the transaction would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support,” he wrote.
Many insurers have said they are losing money because the Obamacare population is sicker than foreseen and risk-adjustment payments from the government are insufficient. The government has made changes aimed at helping insurers, which say it has not gone far enough to make the business sustainable.
The Justice Department moved on July 21 to block Aetna’s acquisition of Humana and Anthem Inc.’s purchase of Cigna Corp. after an antitrust review, saying the two deals would lead to higher prices.
Aetna spokesman T.J. Crawford said the letter was a response to the department’s written request for information. The company’s ultimate decision was based on financial information obtained after the letter was sent, he said.
“That deterioration, and not the DOJ challenge to our Humana transaction, is ultimately what drove us to announce the narrowing of our public exchange presence for the 2017 plan year,” Crawford said.
The release of the documents is unusual in a Justice Department antitrust investigation. So was the review, conducted in tandem with the Anthem-Cigna investigation and involved a business in which the Obama administration was deeply invested.
In June, ongoing dialogue between Aetna and the department about the exchanges turned to discussions about the potential impact of a failed deal on those markets, according to a person familiar with the situation.
Assistant Attorney General William Baer, who was leading the review, sent a June 30 request to Aetna for information on the consequences of not completing the deal.
A copy of the government document sent to Aetna shows the Justice Department asked for data on costs such as the breakup fee; the impact on Aetna’s business strategy, including participation on the Obamacare exchanges; and documents related to a June board meeting, the Humana deal or the exchanges.
Aetna shares rose 1 percent to $120.09. Humana fell 0.5 percent to $178.69.