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Aetna pulls out of another Obamacare health exchange

By Caroline Humer

(Reuters) - Aetna Inc has decided not to sell insurance on New York's individual health insurance exchange, which is being created under President Barack Obama's healthcare reform law, the fifth state where it has reversed course in recent weeks.

The third-largest U.S. health insurer has said it is seeking to limit its exposure to the risks of providing health plans to America's uninsured, but did not give details about its decision to pull out of specific markets.

"We believe it is critical that our plans not only be competitive, but also financially viable, in order to meet the long-term needs of the exchanges in which we choose to participate. On New York, as a result of our analysis, we reluctantly came to the conclusion to withdraw," Aetna spokeswoman Cynthia Michener said.

The New York decision comes as states finalize the roster of health plans that will be offered to millions of uninsured Americans beginning on October 1.

Aetna and its newly acquired Coventry Health unit, a low-cost provider that caters to individuals and Medicaid beneficiaries and provides private Medicare policies, still have applications to sell coverage in 10 states, based on publicly available information.

Michener said the full list of state exchanges where Aetna will participate is still being finalized.

The new online insurance exchanges are the lynchpin of Obama's healthcare reform, representing a massive technology build-out that has run up against multiple delays and political opposition in many states. In their first year, the exchanges aim to provide coverage to 7 million uninsured Americans, many of whom will be eligible for government subsidies.

Aetna's large competitors, such as UnitedHealth Group Inc and WellPoint Inc, have also planned limited entries into the new exchanges while they wait and see whether they operate smoothly and whether enough healthy people sign on to offset the costs of sicker new members.

"We've got this period where the exchange experience, the exchange sentiment, and news headlines are probably not going to be very flattering and that's not going to have a positive impact on turnout," said Jefferies & Co analyst David Windley.

"Longer-term, those kinks will get ironed out, more people will get comfortable and in (the next few years) more people will be accessing their health insurance through an exchange of some sort," he said.

'RISK-BASED APPROACH'

Aetna signaled last month that it was considering withdrawing some applications because of its purchase of Coventry, which also had filed documents to sell insurance plans on exchanges around the country.

"We have taken a prudent risk-based approach to both our overall exposure and exposure within a given marketplace," Chief Executive Officer Mark Bertolini said on a conference call with analysts at the time.

Since then, it has withdrawn applications in Maryland, Ohio, Georgia, and Connecticut, where it is based. In Maryland, Aetna's decision came after state regulators ordered the company to lower rates dramatically from what it had proposed.

Aetna also has filed applications in Florida, Arizona and Virginia, where the federal government will operate the exchanges, and in Washington, D.C., which is running its own exchange.

Coventry filed applications to sell insurance in Florida, Iowa, Kansas, Louisiana, Nebraska, North Carolina, Ohio and Virginia, according to those states' insurance departments. Iowa is working with the government on its exchanges while the rest are being run entirely by the federal government.

Coventry withdrew its applications in Georgia and Maryland when Aetna bowed out but it remains in Ohio. It also withdrew earlier this month from Tennessee.

Aetna and Coventry may also have filed plans in other states that have not released any information about participants.

Insurance plans in the 33 states that have defaulted to the federal government exchanges must be approved by the Department of Health and Human Services (HHS), and then insurers sign off on them. Earlier this week, HHS delayed the sign-off deadline to mid-September after originally aiming for early next month.

Michener said the company will continue to serve small business and large business customers in New York and will offer products to individual consumers outside of the exchanges.

Only 17,000 or so people in New York currently buy individual insurance, but the exchange is expected to bring in 1 million people during the first three years. The exchange announced insurance participants on August 20. Aetna was not on the list.

(Reporting by Caroline Humer; Editing by Michele Gershberg and Eric Walsh)

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