Healthy people vs. healthy profits

The Affordable Care Act, aka Obamacare, was always a three-legged stool tottering on two fragile legs: healthy competition among healthcare insurance companies and the ability of each insurance company to make healthy profits.

In its $37 billion bid to take over Humana, Aetna (one of the five largest insurance companies in the United States) decided to lower the level of competition. And in order to safeguard both its profits (which increased 38 percent in the final quarter of 2015) and its takeover of Humana (in a game of chicken with the Justice Department), Aetna has announced its decision to “reduce its individual public exchange participation from 778 to 242 counties for the 2017 plan year.”

Aetna’s basic complaint (in addition to its beef with the administration over the Humana merger) is that too many Americans suffer from poor health and thus need too much health care. Or, in its own language:

Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool. Fifty-five percent of our individual on-exchange membership is new in 2016, and in the second quarter we saw individuals in need of high-cost care represent an even larger share of our on-exchange population. This population dynamic, coupled with the current inadequate risk adjustment mechanism, results in substantial upward pressure on premiums and creates significant sustainability concerns.

Clearly, Aetna (not to mention the other healthcare insurance companies) wants both healthy people (who are much cheaper to insure) and healthy profits (which will increase if it is allowed to acquire Humana).

The problem of Obamacare—as against a single-payer plan or, even more, a single-provider plan—is it can’t guarantee both. And when push comes to shove, for companies like Aetna, the decision to continue healthy profits wins out over coverage of unhealthy people.