(New throughout, updates share price)
By Caroline Humer
April 24 Aetna Inc said on Thursday its
first few months under Obamacare turned out better than some
investors had feared as it added new members not only on the
exchanges but in its traditional large corporate business.
Aetna's shares surged nearly 6 percent as the company
allayed Wall Street concerns that health costs were higher than
what it and competitors had planned for. It also said it beat
first-quarter profit expectations as bad weather helped keep
down doctor visits and medical costs.
This year, Aetna introduced health plans in 17 of the new
insurance exchanges created by President Barack Obama's
healthcare law nationwide, making it the largest player by
number of states, ahead of even WellPoint Inc.
A rocky start to the exchanges, with technical failures and
an advertising counteroffensive by Republican opponents of the
Affordable Care Act, had raised fears of weak enrollment skewed
toward older and sicker consumers.
Aetna, which had warned it could lose money on the insurance
exchanges, said enrollment exceeded expectations at about
230,000 sign-ups. It also said the health of its new members so
far appeared to match how it priced those plans. It is
considering remaining in 17 markets for 2015.
The No. 3 U.S. health insurer also said membership in its
corporate-sponsored plans surged by more than 400,000 people,
helping quarterly profit beat Wall Street expectations and
countering concerns that employers would be quick to send
workers to the Obamacare exchanges.
"With one quarter down, it appears that our pricing for
this year on all of our commercial business was appropriate and
it appears adequate enough for us to recover the new taxes and
fees that are going to be imposed on us," Aetna Chief Financial
Officer Shawn Guertin said during an interview.
Aetna said the total number of Obamacare enrollees for 2014
could even swell to 450,000 as more last-minute sign-ups are
processed, and as some people qualify for coverage due to
changes in status. The Obama administration has reported 8
million new sign-ups in the program nationwide so far.
Aetna shares rose 5.9 percent to $72.96 and WellPoint Inc.,
which reports next week, gained nearly 2 percent to $96.54.
Larger rival UnitedHealth Group rose 1.7 percent.
"Part of the reason (Aetna) stock is reacting so well is
their comments on pricing," explained Sarah James, an analyst
for Wedbush Securities.
Last week, UnitedHealth said more healthy consumers and
small businesses renewed their policies rather than buying
Obamacare plans, making the latter less profitable. Aetna said
the renewals had occurred as expected and that its pricing was
Chief Executive Officer Mark Bertolini said Aetna expects to
submit proposed premium rates ranging from the low single-digit
to double-digit percentages or more in its Obamacare markets for
2015. Those price increases are expected to play into the
political fight over Obamacare as Republican lawmakers play up
its faults ahead of congressional elections in November.
HEPATITIS C DRUG CONCERNS
Aetna raised its forecast for 2014 profit, saying it
expected to end the year with an additional 800,000 to 1 million
customers, with a total of more than 23 million people and $56
billion to $57 billion in operating revenues.
It expects earnings of $6.35 to $6.55 per share, up from a
previous forecast of at least $6.25 per share.
Aetna said that another area of cost concern, an $84,000 new
hepatitis C drug by Gilead Sciences Inc, had not
materialized in its first quarter but would still be tracked
closely this year.
UnitedHealth said last week that spending on the new
treatment, which has spurred a global outcry over the rising
cost of novel drugs, had exceeded its expectations several times
over. Aetna said it spent $30 million paying for
the Sovaldi drug from Gilead in the first quarter, matching its
In all, the health insurer's quarterly operating profit grew
to $1.98 per share as severe winter weather slowed medical
services use, which kept claims and costs down. A moderate flu
season also helped, it said.
Analysts on average had expected earnings of $1.55 per
share, according to Thomson Reuters I/B/E/S. That figure
excludes items such as acquisition costs for the purchase of
Coventry last year, whose inclusion also helped profit.
Revenue rose to $14 billion from $9.54 billion in the year
earlier quarter. Aetna said it had raised health plan premiums
to offset new taxes and fees set by Obama's Affordable Care Act.
They include a fee used to help fund the exchanges, which began
providing coverage on Jan. 1.
Aetna said it had 22.72 million medical customers at the end
of March, up from 22.19 million at the end of December and 18.3
million at the end of March 2013.
(Reporting by Caroline Humer; Editing by Michele Gershberg,
Sofina Mirza-Reid and David Gregorio)