Aetna Inc. is calling it quits in the public exchange business in 11 of the 15 states in which it is currently present. It will, however, maintain its presence in Delaware, Iowa, Nebraska and Virginia. Aetna will reduce its individual public exchange participation to 242 counties from the initial 778 ones for the 2017 plan year.

This development comes after Aetna suffered a pretax loss of $200 million in the second quarter and total pretax losses of more than $430 million since Jan 2014 in its individual products sold via the public exchanges.

Earlier, Aetna expected to be at a breakeven in this business in 2016, but now is reevaluating it since it is witnessing huge claims from the sicker-than-expected customers enrolled at the public exchanges. The number of healthy and young individuals which enrolled at these exchanges are far less than the customers with old age and pre-existing diseases who lacked coverage earlier. This adverse mix of customer population led to increased claims, leading to losses for the insurer.

Last year, UnitedHealth Group Inc. (UNH Quick QuoteUNH - Free Report) was the first among the health insurers to spell out its troubles on the public exchanges. In order to scale back its activity on the exchanges recently UnitedHealth withdrew platinum products, increased prices, eliminated marketing and commissions, intensified clinical engagement and medical management with this membership group and reduced operating cost.

Another player Humana Inc. (HUM Quick QuoteHUM - Free Report) recently announced it will sell plans through public exchanges in 11 states in 2017, down from 15 states this year because of losses.

Anthem Inc. also witnessed huge claims in its public exchange business in the second quarter.

Insurers by and large have had an adverse stint on the public exchanges, which were created under the Affordable Care Act, also known as Obamacare, to provide insurance to more than 9 million individuals. The recent exits on public exchanges by health insurance majors raises questions about the viability of online exchange business which was created to provide subsidized health insurance coverage. Moreover it is most likely that other insurers would also be thinking to exit the exchanges. Most of the players are realizing that exchanges do not provide profitable business opportunity, and that this may cause a mass exodus which may hamper the functionality of the exchanges and cause a failure of the Obamacare program thus defeating the central aim of providing coverage to millions of uninsured Americans.

Aetna carries a Zacks Rank # 3 (Hold).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>