Health insurance being displayed on a computer screen on a desk

As the health insurance industry awaits federal action on the massive pending mergers of Aetna with Humana and Anthem with Cigna, its players are not standing still – they don’t dare, given the turbulent nature of the healthcare market and the ever-present demands to cut costs.

For one thing, the carriers participating in the Accountable Care Act insurance exchanges have had to respond to bad financial results – ranging from losses in the hundreds of millions to a very low profit level – in the segment for 2015.

The major carriers have raised premiums, of course, but have gone much farther to stem the financial bleeding: Health Care Service Corp., for example, eliminated its broad-network PPO products on the exchanges, replacing them with HMOs and narrow-network PPOs. Many of the major carriers and Blue plans stopped paying brokers for selling exchange products. Still others dropped some of the platinum and gold products that tended to attract high-cost members. UnitedHealth Group has announced that it’s considering withdrawing from the exchanges altogether in 2017, and Aetna has said it’s “assessing” its future participation.

Despite the warnings, we expect UnitedHealth Group and the other major insurance carriers to remain in the Exchanges for 2017, although they may pull out of some unprofitable areas. And here’s the reason: the 2016 election in November will determine the political backdrop of the ACA’s future going forward, including whether the ACA Exchanges will be reformed, overhauled completely, or ended. If a Democrat is elected president, the new administration will listen closely to the current stakeholders regarding reforms to stabilize the exchanges – and, by extension, the entire individual market, going forward. None of the major players can afford not to have a seat at the table.

Another trend that has been at work is the re-emergence of HMOs and restrictive networks as a means to save costs. Ever since the public backlash against HMOs in the 90’s, HMOs have lost membership as most group plans have shifted to a PPO format providing a choice of network and non-network providers. But with so many exchange carriers turning back to restrictive network plans, we expect the numbers of HMO enrollees will increase in 2016 for the first time in more than a decade. As of July 2015, 27 million Americans were enrolled in HMO products.

We can’t predict whether the Justice Department will intervene to stop the pending mergers of Anthem/Cigna and Aetna/Humana. But if the mergers are allowed to proceed, both entities will be required to divest some health plan assets in order to assure competition in some regions. It will be cold comfort to many hospitals and physicians and employers in those areas who believe they’ll be disadvantaged by these massive new entities and their power in the marketplace.

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View the rest of the 2016 Targeted Insights series.

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