Investor suit claims Aetna hid rising medical costs

NEW YORK, Oct 24 (Reuters) - An investor on Wednesday sued health insurer Aetna Inc (AET.N) claiming the company misrepresented or failed to disclose information to investors about increases in medical costs, according to a copy of the lawsuit.

The suit, filed by the Southeastern Pennsylvania Transportation Authority in U.S. District court in Philadelphia, is seeking class action status.

Specifically, the suit claims that during the second half of 2005 Aetna told investors its operating income was growing. But the suit claims that unbeknownst to investors the percentage of dollars the company spends on healthcare was rising.

Then in April 2006, the suit claims Aetna shocked investors by disclosing higher medical costs. The stock dropped more than 20 percent in the week after the company told investors about the cost.

The suit claims, that to investors, the higher costs paired with accelerating membership growth, suggested the company was under-pricing its health plans.

The suit also names the company's retired Chairman John Rowe, its chief financial officer Alan Bennett and its head of strategic planning Craig Callen as defendants, claiming they and the company had information about the rising medical costs in 2005 that they should have shared with investors.

A spokesman for Aetna could not be immediately reached for comment on the lawsuit. (Reporting by Emily Chasan)