Aetna is pulling out of 11 of the 15 states it serves on the Obamacare exchanges and canceling plans to join the exchange in Maine. The reason is no surprise: It’s losing substantial amounts of money on its exchange policies.

That’s not necessarily the only reason, of course. Companies in heavily regulated industries like health care spend a lot of time engaging in n-dimensional chess games with the various state and federal entities that have jurisdiction over their operations. Public statements and market moves may be exactly what they look like. Or they may involve a factor that does not, at first glance, appear to be much related.

In this case, it has been suggested that Aetna may have in mind its proposed merger with Humana (and that related announcements by Anthem are designed to aid Anthem’s Cigna merger). The U.S. government is suing to block both mergers; the companies would, obviously, like them to go through.

The deals would consolidate an industry that now has five major insurers down to three, giving them considerably more pricing power. Because the individual market is a relatively small piece of their business, those mergers are probably worth a lot more to them than whatever good will the companies earn by losing money on the exchanges.

The losses are not to be ignored. Insurance regulators and the Securities and Exchange Commission do not give the firms much room to claim that they’re losing money if they’re actually making it hand over fist.

Even if that weren’t the case, the failure of so many co-ops, which don’t have other lines of business, suggests that these markets are not, on the whole, a good place for insurers to make money. But it’s at least plausible that if the government weren’t blocking their mergers, these companies might be willing to go along with those losses for a few years in order to generate some regulatory good will for their broader business.

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If that’s the case, the question is: What matters to regulators more? Blocking the mergers, or keeping the exchanges healthy? That’s not an easy question. It looks as if Aetna’s withdrawal will leave at least one county – Pinal, in Arizona – with no insurers at all selling exchange policies. And unless something pretty drastic changes in these markets, it seems unlikely that Pinal County will be the last to lose all its insurers.

The state regulator has made hopeful noises about persuading someone to pick up the business. (Remember the regulatory good will we mentioned above?) But regulators in relatively small states don’t necessarily have that much clout with big insurers, which can afford to keep taking these losses for years.

California can plausibly say “Play ball with us or get ready to lose our nearly 40 million citizens as potential customers,” but a big corporation probably does not fear the market-shaking powers of the Vermont Department of Financial Regulation. And more locally concentrated firms cannot keep eating large losses for an indefinite period. It is obviously a problem – for politicians, as well as customers – if a growing number of people have a theoretical right to buy health insurance but cannot actually buy any.

But allowing the mergers to go through could well mean price increases in other markets. Bigger insurers gain more pricing power against rapidly consolidating provider networks. They also gain more pricing power with customers. Industries dominated by a few major players are not, in general, known for their high quality and low costs. Allowing the mergers to go through could stave off the immediate problem with the Obamacare exchanges at the cost of raising insurance costs for everyone else – and giving Democrats big headaches in 2018 and 2020.

We can expect to see a lot of such quandaries going forward. The exchanges do not seem to be stabilizing; instead, they seem to be growing more unstable over time, particularly outside large urban areas where there are enough providers and slack capacity in the health care system to provide some check on the problems that have plagued insurers elsewhere.

Insurers cannot simply go on eating those losses forever. They certainly won’t do so for free. Unless the exchanges get a rapid infusion of healthier customers who pay substantial premiums without using much care, insurers are going to keep pulling out of the areas where they are losing money. Or at the very least, they will demand benefits from the government to make it worth their while to stay.


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