Aetna Forcing 600,000-Plus To Lose Coverage In Effort To Raise Profits

[one...two...tree 2,762]

Health insurance giant Aetna is planning to force up to 650,000 clients to drop their coverage next year as it seeks to raise additional revenue to meet profit expectations.

In a third-quarter earnings conference call in late October, officials at Aetna announced that in an effort to improve on a less-than-anticipated profit margin in 2009, they would be raising prices on their consumers in 2010. The insurance giant predicted that the company would subsequently lose between 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.

"The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering," said chairman and CEO Ron Williams. "We view 2010 as a repositioning year, a year that does not fully reflect the earnings potential of our business. Our pricing actions should have a noticeable effect beginning in the first quarter of 2010, with additional financial impact realized during the remaining three quarters of the year."

Aetna's decision to downsize the number of clients in favor of higher premiums is, as one industry analyst told American Medical News, a "pretty candid" admission. It also reflects the major concerns offered by health care reform proponents and supporters of a public option for insurance coverage, who insist that the private health insurance industry is too consumed with the bottom line. A government-run plan would operate solely off its members' premiums.

Aetna actually made a profit in 2009 but not at levels that it anticipated.

"They were surprised by an acceleration in medical costs in 2009 which pressured their earnings," Josh Raskin, an industry analyst for Barclays Capital, told the Huffington Post. "In an effort to get back to a more profitable level, they are raising their prices to match cost trends. When you raise rates, you run the risk of losing your membership. Health insurance is a very competitive marketplace."

As Williams told investors on the call: "The pricing that we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering."

Aetna is one of the largest insurers in the private market, covering roughly 17.7 million people according to its 2008 annual report. It is also a major player in the current health care debate and inside Washington D.C. The insurance company has spent more than $2 million on lobbying just in 2009, according to the Center for Responsive Politics.

American Medical News, which first reported the story, noted that this is not the first time the insurance giant has cut the rolls in an effort to boost profit margins. "As chronicled in a 2004 article in Health Affairs by health economist James C. Robinson, MD, PhD, Aetna completely overhauled its business between 2000 and 2003, going from 21 million members in 1999 down to 13 million in 2003, but boosting its profit margin from about 4% to higher than 7%."

http://www.huffingtonpost.com/2009/12/04/a...s_n_380130.html

[TexPamp 0]

The insurance companys are going to price themselves out of business. What a crying shame that health care has become a luxury item in this country.

[slim 1,533]

What a crying shame that medical costs have gotten so expensive we need an insurance plan just to pay for them.

Add to the list of shame -

The liability insurance that goes with health care

The prescription drugs that most Americans think they need to take on a daily basis

The "necessity" we've developed in this country to have medical care for every discomfort imaginable

The fact the government is going to require all of us to have insurance soon

Where's BY when we need him?

[thongd4me 69]

All together now, "AETNA SUCKS!"

I wish I had another option but that's what's available at work.

Edited December 7, 2009 by thongd4me

[Nizzy 1]

They forced me off of my husband's plan because I was employed and could get insurance through my job.

[mawilson 2,133]

Wouldn't these people just go somewhere else? I don't really see how losing customers is good for business, but maybe it's just me.

[Dan J 277]

Wouldn't these people just go somewhere else? I don't really see how losing customers is good for business, but maybe it's just me.

It is if these customer cost you more than what you are making of them, of course it makes sense.

[w¡n9Nµ7 §£@¥€r 123]

They forced me off of my husband's plan because I was employed and could get insurance through my job.

I have heard from management that my employer considered doing that for this year but decided not to because the companies my employer competes with for talent haven't done it yet. It's just a matter of time.

[mawilson 2,133]

Wouldn't these people just go somewhere else? I don't really see how losing customers is good for business, but maybe it's just me.

It is if these customer cost you more than what you are making of them, of course it makes sense.

But they are raising premiums across the board, not targeting specific customers.

[w¡n9Nµ7 §£@¥€r 123]

Wouldn't these people just go somewhere else? I don't really see how losing customers is good for business, but maybe it's just me.

It is if these customer cost you more than what you are making of them, of course it makes sense.

But they are raising premiums across the board, not targeting specific customers.

... 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.

In national accounts and smaller group accounts, they can't raise rates for specific members. They can raise rates for entire groups. That's what they're doing and anticipating that the effect will be some number of groups will drop Aetna and either decide to no longer provide coverage or move to a different insurer. Furthermore, they're anticipating that the net effect of these drops will be 3approx 600k fewer members. They've also reached the conclusion that once dropped, their new overall pool will have a lower actuarial value than their current one... which is what they want. That makes Wall Street happy.

Edited December 7, 2009 by w¡n9Nµ7 §£@¥€r

[mawilson 2,133]

Wouldn't these people just go somewhere else? I don't really see how losing customers is good for business, but maybe it's just me.

It is if these customer cost you more than what you are making of them, of course it makes sense.

But they are raising premiums across the board, not targeting specific customers.

... 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.

In national accounts and smaller group accounts, they can't raise rates for specific members. They can raise rates for entire groups. That's what they're doing and anticipating that the effect will be some number of groups will drop Aetna and either decide to no longer provide coverage or move to a different insurer. Furthermore, they're anticipating that the net effect of these drops will be 3approx 600k fewer members. They've also reached the conclusion that once dropped, their new overall pool will have a lower actuarial value than their current one... which is what they want. That makes Wall Street happy.

Well I'm sure they know what they're doing, but they can only drop so many customers before

they hit diminishing returns with higher premiums.

[Joseph & Ana 0]

50 million will be dumped under obamacare. Probably more.

[SMR 368]

The real bottom line here is that health care is getting more expensive. Aetna is trying to achieve their historical profit margin. If they have to raise premiums to do that, that's because health care is becoming more expensive.

Instead of trying to punish insurance companies for doing what they have always done, we need to implement legislation that will actually control health care costs. I don't want to go over again about how to do this. But it really has nothing to do with a government payer option. If government payer legislation gives the government payer some legal power to negotiate rates that insurance companies don't have, that would really be a direct violation of the free market. Otherwise, the government payer option would be paying spiraling health care costs the same as the insurance companies. While in theory the government option could be cheaper by eliminating the need to make a profit, the government doesn't have a good record at doing things more efficiently. I, for one, am pretty confident that that extra margin would get eaten up by red-tape and free-loaders.

[thongd4me 69]

They forced me off of my husband's plan because I was employed and could get insurance through my job.

My ex-wife remained on the Aetna plan until the divorce was final.

She had part time work for which she was getting under $20K a year

and they didn't force her out of the plan.

After the divorce she took the optional insurance program from her job

as there is no COBRA (insurance coverage for divorcing spouses) with my employer.

I don't know if having no COBRA is something common to all Aetna customers or not.

[Dan J 277]

The real bottom line here is that health care is getting more expensive. Aetna is trying to achieve their historical profit margin. If they have to raise premiums to do that, that's because health care is becoming more expensive.

Instead of trying to punish insurance companies for doing what they have always done, we need to implement legislation that will actually control health care costs. I don't want to go over again about how to do this. But it really has nothing to do with a government payer option. If government payer legislation gives the government payer some legal power to negotiate rates that insurance companies don't have, that would really be a direct violation of the free market. Otherwise, the government payer option would be paying spiraling health care costs the same as the insurance companies. While in theory the government option could be cheaper by eliminating the need to make a profit, the government doesn't have a good record at doing things more efficiently. I, for one, am pretty confident that that extra margin would get eaten up by red-tape and free-loaders.

The goals of a strong healthcare system and free market are somewhat opposed, which is why a free market solution would never really work, at least not without heavy regulation (like Switzerland).

Overhead at private insurance companies has been around 20% while most comparable government systems around the world have overhead of only 2-4%.