Aetna Inc (NYSE:AET) has decided not to reinstate or extend individual health insurance plans that are being canceled with the advent of the U.S. Affordable Care Act because the time frame is too short.
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Aetna is the largest insurer yet to announce a decision on how it would proceed across the United States after President Barack Obama said last month that insurers could extend these health plans under a temporary transitional policy.
Aetna's move means that some consumers, who are required to have health insurance in 2014 or pay a fine, will need to buy a new plan for 2014. Aetna CEO Mark Bertolini made the comments at an investor meeting on Thursday.
Aetna, the third-largest U.S. insurer, declined to say how many individuals have plans that are being canceled or how many were offered early renewals on their expiring 2013 plans to enable them to continue coverage into 2014.
The company would have had to seek approvals for rate increases across the United States, which it said would distract it at a busy time of year.
Aetna's move is in contrast to some state-based Blue Cross Blue Shield plans, such as BCBS of Florida and BCBS of North Carolina, which have said they would extend these plans under the transitional policy.
Obama made the policy change allowing insurers to extend health plans under a temporary policy after hundreds of thousands of individuals received notices that their plans were being canceled. The cancellations became a political issue because Obama had promised Americans that if they liked their plan, they could keep it.
Aetna said that it has offered early renewals on plans, which allow consumers to keep their coverage for up to a year longer and into late 2014.
"We talked to the insurance commissioners and the insurance commissioners have agreed with us. If we were to go to all those states, refile all those plans, refile all those rates and do it in time for December 23, we would have paid attention to nothing else," Bertolini said.
Consumers must decide whether to buy plans on the exchanges by December 23 for coverage to start on January 1, 2014.
Aetna is offering plans in 16 states, which means it covers about 30 percent of the exchange marketplace. The exchanges, created under the Affordable Care Act, opened on October 1 to sell plans for 2014. Technology problems have hobbled the ability of consumers to sign up and highlighted the cancellation issue.
Some state insurance commissioners have said they will not allow these plans to continue while others have said they would allow insurers who rushed early renewals in by December 31 to continue them in 2014.
Still other state commissioners have simply left it up to the insurers to decide. A few million plans were due to be canceled in 2014 and it is not clear yet how many people will in fact lose coverage.
Aetna said it expects to gain customers in only about 15 percent of the marketplaces where it is priced the most competitively.
Bertolini said he expects the public health insurance exchanges, which are under attack by Republicans, to survive the technology issues.
"By 2015, if we get it fixed right, it'll be a new start," he said.
In addition to front-end issues, the website has also had problems communicating data about enrollees to the insurance companies. The U.S. government said last week that over the first two months running the exchange, one in four transmissions had errors. That rate is now about one in ten, the government said.
Aetna said it is still seeing these problems, but could not provide an estimate of how many submissions have errors.
Aetna Chief Financial Officer Shawn Guertin said he is worried about consumers being confused about whether they are enrolled in a plan.
"With where we are now it inevitably will happen," Guertin said in an interview. "We tried to extend our payment dates to head that particular situation off, but when you look at the number of applications that we have and you look at the number of people that have actually paid for January 1 coverage, it's a relatively low number as a percentage."
"It does worry me a little bit whether people actually understand they have to pay that first month's premium," he said. Aetna has extended the payment date to January 8 for January 1 coverage.
Bertolini said it is important to get the information right in time for January and that the company has been working closely with the government.
"We're coming up with workaround solutions in case things aren't ready," he said. "There is a lot of that cooperation going on now, whereas in the past it was pretty much hands off, but once the stuff really hit the fan there was a lot of engagement."
(Reporting by Caroline Humer in New York; editing by Michele Gershberg and Matthew Lewis)