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Aetna submits 2016 rates with eye on Supreme Court subsidy ruling

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(Reuters) — Aetna Inc., the third-largest U.S. health insurer, is submitting 2016 individual insurance rates to state regulators but said it might need to reexamine them after the U.S. Supreme Court rules on the legality of certain health care reform exchange subsidies.

The nation's top court is expected to announce a decision in June on whether federal subsidies can stand in three dozen states where the U.S. government runs an enrollment website. Opponents of the law say the Affordable Care Act allows for subsidies only in states that run their own exchanges.

The court's decision could affect an estimated 7 million people who receive subsidies to help pay for the plans and may not be able to afford insurance otherwise. Industry experts say insurers would probably need to raise their rates further if many people do not buy medical coverage after losing subsidies.

Aetna Chief Financial Officer Shawn Guertin said the company had been submitting proposed rates based on the assumption that the subsidies will stay in place. Even if the Supreme Court rules against them, the government or legislators may be able to keep them in place with a new law or administrative rule.

“If that doesn't happen, then we would need to revisit our rates, and most of the regulators clearly understand that,” Mr. Guertin said in an interview after the company reported its quarterly earnings.

Aetna expects the individual exchange business to account for about 6% of revenue in 2015, up from about 5% last year, and to be “moderately profitable” for the year, Mr. Guertin said.

“Right now we are assuming that status quo will prevail for the balance of this year,” he said. “Obviously if that changes, then we would change our outlook.”

Aetna said it had 950,000 individuals signed up for marketplace plans, beating its expectations. More than half were new customers, and about 90% of its individual customers receive subsidies, it said.

UnitedHealth Group Inc., the largest U.S. insurer, said earlier this month that it had signed up 570,000 exchange customers for 2015, also beating expectations.

Leerink Partners analyst Ana Gupte said investors expect insurers to face only a small hit to their businesses if the Supreme Court rules against the subsidies.

“I'm sure that would disrupt their strategic outlook and their business operations and they'd have to rethink it,” she said, “but it's not financially very material.”