According to sources, Aetna Inc.
(AET - Free Report
) has pulled out of the New Jersey health insurance exchange. We believe this decision by the company is driven by disagreements over pricing.
Most recently the Aetna announced its exit from the New York HIE. It has also withdrawn plans to offer coverage through exchanges in Connecticut, Maryland, Georgia, and West Virginia.
Aetna is taking a very conservative approach to the Health Insurance Exchanges (HIEs), which we believe is a prudent strategy adopted to preserve returns and reduce margin volatility. Recently Aetna indicated that it will limit its 2014 exposure to public health insurance exchanges (HIE) to 15. In addition to this, Aetna will participate in 15, if not more private exchanges, including its own. Final determination will be, however, based upon each market's provider relationships, regulatory environment, and other factors. However, this conservative approach could pressure commercial enrollment trends in 2014 and 2015.
The HIEs are mandated by Health Care Reform Act. The insurance exchanges for the individual and small group markets are scheduled to be operational in 2014. The exchanges will be online markets where consumers and small businesses can buy health insurance. On these sites, they can compare all the available plans and then purchase a suitable plan online. The HIEs are estimated to provide up to 29 million people with affordable health insurance by 2019.
The motive behind establishing the HIE is to offer affordable, quality health insurance to small businesses and for low to middle income Americans to purchase their own health coverage via subsidies, competition and regulation. These groups have been striving for a long time to obtain affordable healthcare plans that meet the current standards of health care under Obamacare. The online health insurance marketplace is meant to remedy this.
From the health insurer’s perspective, these exchanges will create stiff competition. The revenue generation of the participating companies will shrink because of decreased prices. However, the players will have wider access to the markets, which will increase the company value.
Another company, UnitedHealth Group Inc.
(UNH - Free Report
) , is also taking a very conservative approach to the HIEs. So far the company has indicated that it will participate in 12 health insurance exchanges. Another player, WellPoint Inc.
, has plans to participate in 14 HIEs in 2014.
Another player Molina Healthcare, Inc.
(MOH - Free Report
) is also participating in a number of exchanges.
UnitedHealth carries a Zacks Rank #3 (Hold).