Aetna’s defection comes with risk

Aetna’s defection comes with risk
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Aetna is choosing to abandon a powerful insurance industry trade group at a time when its agenda has never been more ambitious.

Some experts say they’re baffled by the move, which they say is risky for the company’s reputation, particularly as it moves forward with the closely watched merger of another insurer giant, Humana.


“With Aetna and [UnitedHealthcare] facing such tough regulatory scrutiny, it seems silly that they would abandon one of D.C.’s most powerful trade organizations,” said an insurance industry source who asked for anonymity in order to speak freely. “They are putting their brand at risk.”

Others say the decision by the nation’s third-largest insurer to leave America’s Health Insurance Plans (AHIP) is the biggest sign of trouble yet for the industry’s most influential group. Aetna’s announcement on Tuesday follows the lead of the nation’s largest health insurer, UnitedHealthcare, which defected from the group last year.

The companies’ decision to fly solo comes at a precarious time for the insurance industry. Healthcare insurers, which were targeted during the early days of the Affordable Care Act, are again taking heat in 2016, with candidates from Hillary ClintonHillary Diane Rodham ClintonHeller won't say if Biden won election Whitmer trailing GOP challenger by 6 points in Michigan governor race: poll GOP political operatives indicted over illegal campaign contribution from Russian national in 2016 MORE to Marco RubioMarco Antonio RubioDemocrats face bleak outlook in Florida The Hill's 12:30 Report - Presented by Facebook - Dems attempt to tie government funding, Ida relief to debt limit Poll: Trump dominates 2024 Republican primary field MORE calling the companies sworn enemies.

“From an industry standpoint, this will be a frictional year,” said Dan Mendelson, CEO of the consulting firm Avalere Health and a former Clinton administration adviser. “This will be a year when the industry will have to defend itself and correct misconceptions.”

Faced with mounting political attacks, insurers have also stepped up their warnings that rising medical costs, fueled by prescription drug spending, as well as lingering uncertainty from ObamaCare exchanges, are threatening their businesses.

The industry is also facing major mergers between Aetna and Humana and between Anthem and Cigna.

But fresh doubts are swirling around the group that has long represented those concerns.

In the last year, the group lost its leader of 22 years, Karen Ignagni, as well as a pair of senior officials, Mary Beth Donahue and Dan Durham, who were seen as close to the group’s members. Neither Donahue nor Durham has disclosed the reason for their departure or their next moves.

AHIP now has new leadership — a former top ObamaCare official — and a new focus as insurers look beyond the creation and rollout of ObamaCare.

Much of its heavy lobbying presence has been maintained, and in some years even increased, throughout the rollout. Last year, AHIP spent $9.2 million to influence policymakers, compared to the $8.85 million it spent in 2009 during the heat of the ObamaCare debate.

While AHIP does not rely solely on member dues for revenue, it may take at least a small financial hit with the departure of UnitedHealthcare and Aetna.

According to Aetna’s political contribution report, it paid AHIP about $1.1 million in dues every year. In recent years, Humana has been paying about $1.4 million annually. 

AHIP took in a total of $41.5 million in dues in 2014, according to its most recent tax forms.

That shortfall is in danger of becoming more pronounced with the departure of UnitedHealthcare and Aetna, which could bring Humana with it following the expected merger.

According to Aetna’s political contribution report, it paid AHIP about $1.1 million in dues every year. In recent years, Humana has been paying about $1.4 million annually.

However, far before the Aetna announcement, AHIP already had an evolution in the works.

Five years into the ObamaCare rollout, the insurance group’s board of directors called for a fresh agenda last year — one that takes into account the growing number of mergers and consolidations across the healthcare sector.

A representative at AHIP said those efforts were unrelated to recent departures from the group and instead reflects a stronger focus on growing coverage areas like Medicaid and Medicare Advantage.

“The impetus behind it was because of the changing nature of the industry,” a representative for AHIP said.

One healthcare source familiar with the inner-workings of AHIP said those changes are coming too late and will have to be changed again in light of the departures of two of the industry’s “big five” private insurers.  

Still, others who are closely following AHIP say the group is on the rise, citing the high-profile leadership of former Medicare and Medicaid official Marilyn Tavenner.  

“Let’s be real, when Sylvia BurwellSylvia Mary Mathews BurwellThe biggest revelations from Fauci's inbox What a Biden administration should look like Bogeymen of the far left deserve a place in any Biden administration MORE wants to find out what the health insurance industry’s position is on an issue, she’s going to call Marilyn Tavenner. She’s not going to call the CEO of any one member company,” added Mendelson, the former Clinton healthcare adviser.

“AHIP is going to continue to speak for the industry, that’s just what’s going to happen,” he said.

In the last month alone, the group secured a one-year delay of the  health insurance tax, known as the “premiums” tax, as part of the year-end spending bill — a $12 billion win. AHIP has also prevented billions of dollars in cuts to the Medicare Advantage program.

“It’s a little bizarre to me. What policy accomplishments has AHIP not gotten done that makes them so upset?” an insurance industry source said.

The decision by both UnitedHealthcare and Aetna to leave AHIP is a new sign of splintering within organization, whose 200 members range from small one-state plans to giants such as Blue Cross Blue Shield.

The friction among those members, particularly driven by the largest insurers, has been building for years, sources told The Hill.

AHIP was created in 2003, a result of a merger between the Health Insurance Association of America and the American Association of Health Plans.

In recent years, sources told The Hill that the larger companies have felt alienated from the group’s leadership and became concerned that the group’s focus had been placed too heavily on smaller, regional insurers and the nonprofits.

“I think you have an association that was grown by Karen to try to be the end-all-be-all of the entire industry, which in theory makes sense,” said the healthcare source who is familiar with AHIP and who requested anonymity to speak freely. “[But] there are very different issues, very different perspective on how to tackle things. That becomes very untenable and tough to hold together.”