Aetna raised its earnings outlook yet again after the health insurance behemoth posted second-quarter earnings that blew away expectations.
Aetna, which is in the process of becoming even larger through its acquisition of rival Humana, was able to keep medical costs down and directed more members toward high-deductible health plans that have higher cost-sharing.
"Our performance continues to demonstrate the execution of Aetna's growth strategy and the power of our diversified business portfolio," Aetna CEO Mark Bertolini said in a news release. "We believe our proposed acquisition of Humana will further that strategy."
Aetna's $731.8 million profit in the second quarter was 33% higher than the same period a year ago. Earnings per share totaled $2.08. Bertolini said the Hartford, Conn.-based company now expects full-year earnings per share to be "at least $7.40," up from the $7.20 to $7.40 range predicted in the previous quarter and higher than initial expectations outlined before the year began.
Health insurers have benefited heavily under the Affordable Care Act, which has driven business into their government and individual segments through Medicaid expansion and the insurance exchanges.
Insurers also have passed some of the rising healthcare spending onto consumers in the form of "consumer-directed health plans," which have higher deductibles, coinsurance and copayments. Aetna had 4.1 million people in so-called consumer-directed plans, as of June 30, an increase of 16% year over year. Total membership stayed flat at 23.7 million people.
Aetna's overall medical-loss ratio in the second quarter was 81.1%, down from 83.1% in the same period a year ago. The MLR for Aetna's Medicare and Medicaid plans was 80.3%, a significant decline from last year's 86.5%. Managed Medicaid plans do not require a certain percentage of premiums to be spent on medical care yet, although the CMS proposed an 85% cap in a recent rule. However, Medicare Advantage plans must have an MLR of at least 85%. Aetna did not say if it had to refund any money back to Medicare members.
If Aetna's transaction with Humana goes through, it will be the largest private Medicare Advantage insurer in the country with 4.5 million beneficiaries. But experts predict the federal government will require Aetna to divest some plans in areas where competition would be lessened, if the deal receives overall approval.
In the first half of 2015, Aetna recorded $1.5 billion of profit on $30.3 billion of revenue.
