* Aetna may cut back on public health exchanges
* Expects to be on 15 private exchanges
* Sees 2013 earnings of $5.80 to $5.90 per share
By Caroline Humer
July 30 U.S. health insurer Aetna Inc
reported higher quarterly profits on Tuesday as medical costs in
its employer-based and commercial business remained low and it
closed on its acquisition of Coventry Health Care.
Aetna Chief Executive Mark Bertolini said he was
"increasingly confident" the company would have higher operating
earnings in 2014, but warned that Aetna expects lower growth in
private Medicare, where the government has cut spending.
Bertolini said Aetna was cautious about the rollout of the
public health exchanges being created by President Barack
Obama's health reform law, which are due to start to sell plans
to individuals on Oct. 1. The company is examining its
participation, set at 14 states before the Coventry acquisition,
and may cut back, he said.
"We are continuing to evaluate where Aetna and Coventry have
submitted bids and are in the process of rationalizing our
combined exchange participation," Bertolini said.
Aetna plans to take part in 15 private exchanges being
created by benefits companies and others as online sites where
employers can send employees to purchase health plans offered by
several insurers, he said. Aetna is also working on launching
its own exchange for Aetna products, he said.
Aetna's quarterly report comes after similar earnings beats
by larger rivals UnitedHealth Group Inc and WellPoint
Inc, which benefited from low spending by consumers on
People started seeking services from doctors and hospitals
less frequently several years ago because of the weak economy,
and the trend has continued.
Aetna said net income rose to $536 million, or $1.49 per
share, from $457.6 million, or $1.32 per share, a year earlier.
Aetna announced plans to buy Coventry for $5.6 billion last
year in a bet on growth of U.S. government-backed Medicare and
Medicaid programs. As part of the Affordable Care Act, states
have the option of making Medicaid available to more people and
being reimbursed by the federal government.
The law set other rules for insurers, such as the percentage
of medical premium revenue they can spend on healthcare costs.
Aetna said it had a total medical benefit ratio of 82.5 percent
versus 82.4 percent a year earlier.
Excluding gains and charges from lower reserves, a
reinsurance settlement, acquisition costs and capital losses,
the company reported earnings of $1.52 per share. Analysts on
average were expecting $1.41 on that basis, according to Thomson
Aetna shares were little changed on the New York Stock
Exchange, gaining 8 cents to $63.48 at midday.
"I think that the expectation on the upside was actually a
little higher," said David Windley, an analyst at Jefferies &
Coventry helped both profit and revenue. It added 3.7
million members, bringing Aetna's total to 22 million at the end
of June. Aetna said 3.25 million members had insurance based on
high medical deductibles, sometimes called consumer directed
plans. Last quarter it had 3 million in these plans.
Revenue rose to $11.5 billion from $8.8 billion a year
For the full year, the company said it expects operating
earnings of $5.80 to $5.90 per share. Analysts have forecast a
2013 profit of $5.82.