As per Reuters, Aetna Inc. ( AET) has pulled out of the New York health insurance exchange. We believe that this decision by the company is driven by disagreements over pricing.
Aetna has also withdrawn plans to offer coverage through exchanges in Connecticut, Maryland and Georgia. Aetna is taking a very conservative approach to the Health Insurance Exchanges (HIEs), which we believe is a prudent strategy for preserving its returns and reducing margin volatility. 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, these entities 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 a wider access to the markets, which will increase the company value.
Another company, UnitedHealth Group Inc. ( UNH), 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.
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