CNBC got a quote from Aetna on their Pennsylvania strategy:
“We don’t discuss our performance on a state level,” Aetna spokesman T.J. Crawford told CNBC after the insurer’s profitable Pennsylvania picture was first highlighted by the website Balloon Juice on Wednesday.
Crawford declined to say whether Aetna’s plans were profitable in Pennsylvania this year, or identify which, if any, other states where the insurer is exiting were profitable in 2015 and for the current year.
He did note, however, that “past results are not indicative of future performance. Crawford also pointed out that 55 percent of Aetna’s Obamacare customers in 2016 are new customers, and that as a group they tend to have higher medical costs.
That is a very odd statement. It says a lot without saying as much as it looks to be.
Past performance is definitely not indicative of current or future performance. However when I have participated in budgeting exercises for new products, new populations or new geographic areas, we’ve always used either relevant past experience or proxy experience to attempt to budget.
Proxy experience, expert consultants and goat liver reading is not perfect but it is how we budgeted for Exchange in 2014. It is not how my company budgeted for Exchange for 2017.
Instead, we attempted to use as much actual experience as possible to project future expenses. Members were split into different streams by age, gender, geography and past insurance history. People who had multiple years of coverage through Mayhew Exchange had different expense profiles than people who had a prolonged stretch of non-coverage before they came on exchange. The 2015 not previously covered population looked a bit like the cohort who first got coverage in 2016 who also looked reasonably closely like the people who first got coverage in March 2014.
Projections can blow up. But what blows up projections are either completely unknown shocks, assumptions that prove not to be true or variance that consistently falls in a non-random location. I understand that.
When Aetna was running their pricing models for the Pennsylvania rate filings for the 2017 policy year, they had decent data. They had 99% of the claims for their 2015 policy year, 90% or more of their claims for their January and February 2016 policy months, 70% of their claims for March, and 50% of their claims for April. If their newly covered populations were going to be unexpectedly high cost utilizers, it would have shown up in their claims data. It might not have completely been there as more claim months and more importantly, more run out for incurred but not reported (IBNR) to go through the system could show catastrophic claims but this is very odd if there was an unanticipated shock in policy year 2016 that only became apparent between June 1 and August 1 when the previous relevant experience period had data that allowed their model to spit out profitable pricing.
Is it plausible that new claims data dramatically changed their future profit projections?
Yes.
Is it likely?
No.
Mary G
First highlighted by Balloon Juice! Way to go, RM! You would think that journalists who actually get paid to cover stuff like this might have had it first, but no…
RealityBites
Can their bluff be called? Can government regulators demand access to their financial records? Great job Richard!
Schlemazel
Nice work RM! I’ll be honest and say I sometimes find your insurance post a bit boring but I always read them because there is always something that makes them worth the time. This is important work you are doing & it is great that you at least get a national mention for your effort. Hope your work get wider notice. Thanks
OzarkHillbilly
Hillbilly’s Razor: If a hillbilly is gettin’ fucked, and there is no good reason for it, chances are some meth addled asshole is at the other end of it.
And congrats Richard, on a job well done. It’s a miracle somebody finally noticed.
Poopyman
There is nothing in their statement that I, a relatively intelligent reader with no experience in insurance, and only a bit of statistics, didn’t already know from reading reports from 2014-2016, plus a bit of common sense.
The spokesman did his job, which was to speak some words and convey nothing. It would be nice to see news orgs continue to pursue this.
Poopyman
@OzarkHillbilly: In the health industry, I doubt there’s a lot of meth. High grade blow, on the other hand ….
satby
Count me as another that is happy to see your thoughtful analysis get wider recognition, Richard. I always read your work too, and I’m a smarter consumer for it. Glad to see national media pick up the story. Hope it has legs. And thank you for all the work you do.
Kenneth Fair
In short, Aetna said, “Nice insurance exchange you got there. Sure be a shame if something happened to it.”
Kudos, RM. I’ve learned a lot about health insurance and the ACA from your posts over the years. They’ve made me a better consumer and a better citizen. Keep it up!
MazeDancer
Yay, Richard! Leading edge journalism much appreciated by all!
lurker dean
great work, richard. what a mealy mouthed response from them. as i mentioned, i sent the article to a reporter who wrote the paper’s article on aetna’s withdrawal. and to will bunch, the inquirer’s “progressive” columnist. haven’t heard anything back. i’ll try to figure out an aggressive PA politician to send this to.
martian
Congratulations on the mention!
weaselone
It’s doubtful that the government could do anything to Aetna, but if they are exiting profitable markets just as an FU to the government for not approving a merger, their shareholders could conceivably have grounds for a lawsuit. They can’t use blackmailing the government as the basis of the business decision, and I don’t think mealy-mouthed statements about not considering individual markets would fly in court. Not an expert in this area, maybe the BJ lawyers could comment.
RSR
Big hat tip to the cite (and the site, and RM).
Poopyman
@lurker dean: Howzabout a Democratic candidate for US Senate?
MomSense
Stay on them, Mayhew!
Anonymous At Work
Two items:
1. “[P]ast results are not indicative of future performance” is always indicative of ‘current reality is inconvenient for our present conversation and we’re hoping that reality changes to better suit our needs.’ Basically, ‘ya got us!’
2. What, if any, remedy is available for regulators who think that a corporation is trying to extort the government in this fashion? Can PA or DoJ enjoin Aetna from leaving the market so quickly?
Richard Mayhew
@Anonymous At Work: IANAL — but legally I don’t think there is much either the DOJ or the Pennsylvania state regulators can do or even if they could do would want to do to keep Aetna in a market. If an insurer really does not want to cover people in a region and they are still in the region, they can find ways to not cover people
Fellatio Alger
I’m late to this, but want to point out that past performance is indeed “indicative” of future performance in the commonly understood sense of the word. It us not 100% guaranteed to be predictive of every future event, but it is one of the best predictors we have.
Gavin
nymag.com/daily/intelligencer/2016/08/aetna-to-feds-give-us-our-merger-or-obamacare-gets-it.html
This needs to be in EVERY conversation regarding Aetna moving forward: They’re lying. And they know they’re lying. These stories about “competitive” are the definition of disinformation.
Nice exchange you got there. Be a shame if something happened to it.
Facts for fun: AETNA’s CEO received 27.9M in compensation this past year. Yeah, they’re struggling.
courant.com/business/connecticut-insurance/hc-aetna-executives-pay-20160408-story.html
Miss Bianca
You got picked up by CNBC? Fantastic! Love to see this story get legs! Thank you so much for all your hard work!
Incidentally, I got in a conversation about Colorado Care, Amendment 69, essentially the single-payer plan for the state, yesterday. This person was saying she had “read bad things about it”. To which I found myself responding, “well, if insurers in rural CO start pulling the same tricks they’re pulling in other states, we may find that this is our best option as a response.” Got to talk about some of the Aetna BS. It may have made an impression.
Gavin
Not sure if my earlier comment was moderated for links.
This needs to be in EVERY conversation regarding Aetna moving forward: They’re lying. And they know they’re lying. These stories about “exiting because they’re not competitive” are the definition of disinformation.
Nice exchange you got there. Be a shame if something happened to it.
Facts for fun: AETNA’s CEO received 27.9M in compensation this past year. Yeah, they’re struggling.
Pangloss
When the Aetna story came out, the way it was covered, I thought… this couldn’t be right. Now their spokespeople are releasing opaque nothings in response to facts from data. The only question is, will reporters ask follow-ups or take dictation?
khead
CNBC needs to pick up the Walter story next.
Feebog
Congrats Richard! I thought the common wisdom was that the sickest people would sign up first. Based on some of your past posts that assumption seems to have been correct. Maybe someone in te MSM could confront them with this?
gene108
Aetna needs to hire some actuaries. They’re supposed to be good at predicting future results based on past performance.
Citizen_X
Crap! We have company again? *Pulls on pants, starts picking up empties*
Seriously, though, good job, Richard!