remains wary about expanding its presence in public healthcare exchanges
for 2015 because of lingering uncertainties about the emerging marketplaces, the company's CEO said Thursday. That news came as the Hartford, Conn.-based insurer reported that it significantly exceeded profit expectations during the first quarter of 2014, and so is projecting higher earnings for the year.
Aetna added 230,000 paid members through the exchanges for coverage that was effective during the first quarter of the year. But that was offset by a 130,000 reduction in individual enrollments outside of the exchanges. So far this year 600,000 individuals have signed up for Aetna plans through the government-run marketplaces. Of those, roughly 500,000 have followed through with their first premium payments.
The company had 22.7 million health-insurance enrollees at the close of the first quarter. That was up from 18.3 million a year earlier, a 24% increase. Aetna has added more than 500,000 individuals to its rolls since the end of last year. That includes nearly 400,000 additional enrollees in the commercial sector and an increase of 133,000 Medicare
beneficiaries. Those gains were partially offset by a 40,000 reduction in Medicaid
enrollees. Aetna CEO Mark Bertolini
indicated that the company expects to have a similar presence during the 2015 open-enrollment period, which starts Nov. 15, and that premium increases will range from low single digits to double digits, depending on the market. In particular, he expressed concern about changes to the rules under the Patient Protection and Affordable Care Act and the difficulty that creates in offering competitive, profitable products.
“As a result, our conservatism goes up,” Bertolini said on a call with investors Thursday. “We'll have to go market by market as we move ahead.”
Aetna reported earnings of $666 million during the first three months of 2014—an increase of 36% compared with the same period the prior year. That was on revenue of $14 billion, up from $9.5 billion in 2013. The company had a profit margin of 4.8% for the recently completed quarter, compared to 5.1% during the prior year.
Aetna reported earnings per share of $1.82, up from $1.48 during the comparable period in 2013. For the year, the company boosted projected operating earnings per share from $6.25 to at least $6.35.
Company officials attributed robust profits to enrollment growth, improvement in the company's medical-loss ratios and increased revenues from the 2013 acquisition of Coventry Health Care in Bethesda, Md. But they also cited one-time factors—specifically, harsh winter weather and a mild flu season—as factors that temporarily lifted profits.
Market watchers were buoyed by the results. Analysts at Barclays characterized the report as “significantly better than even the most optimistic expectations.” The company's stock price was up 5% in early trading.
However, anticipating threats to revenue, insurers have expressed concern in recent weeks about the cost of treating hepatitis C patients with Sovaldi. The drug was approved by the Food and Drug Administration in December and can cost $80,000 for a full course of treatment. Aetna's chief financial officer, Shawn Guertin, indicated that the company spent $30 million on the drug in the first quarter, which was in line with projections.
“Overall we look at this as one of the strain items that could potentially be there,” Guertin said. Follow Paul Demko on Twitter: @MHpdemko