As U.S. legislators continue to argue over the viability of Obama’s health care plan, health insurers such as Aetna, Hartford, Conn., are seeing profit erosion and turmoil over what or who to blame.
In releasing its Q2 financials, Aetna blamed health care providers and the slumping economy for costs that exceeded what the insurer forecast in premiums. The level and depth of care being provider are giving patients per diagnosis has risen, said the company.
"We think there's a tendency to maximize or optimize their revenue streams by doing more things," Aetna CFO Joe Zubretsky said. "Clearly there's a behavior change."
The increase in costs for its commercial business, which includes private employer-sponsored coverage and individual policies, led to bigger bills for emergency room, urgent care, laboratory and preventive services, according to an Associated Press report.
Claims costs in particular jumped to between $10,000 and $50,000 since late last year. Aetna said in an earnings call that its commercial medical benefit ratio, which measures the percentage of premiums paid to cover medical claims, rose to 85.9% from 80.5% a year ago.
Financial analysts point to lower than competitive prices as also contributing to the company’s performance.
Commenting on the Aetna earnings statement, David McSweeney, COO of Healthcare Data Management Inc. (HDM), a provider of health plan audits and analytics, argued that, "'Higher cost setting' is just another way of saying hospitals and doctors are hurting because of the economy and they need to generate more revenue. Immediate actions to address these issues will mean increasing premiums for employers."
In a call with analysts, chairman and CEO Ronald Williams claimed the company now has a good grasp on what to expect for the remainder of 2009. "I would say we have, at this point, a high degree of comfort," he said.
The company now expects adjusted earnings of between $2.75 to $2.90 per share. On June 2, it lowered its profit estimate to a range of $3.55 to $3.70 per share from previous guidance of $3.85 to $3.95 per share, noted the AP. Analysts expect earnings of $3.53 per share on $34.35 billion in revenue.
Aetna is reportedly shopping its pharmacy benefits management business, which had about 11.2 million members at the end of the second quarter, according to the Wall Street Journal.
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access