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 Shares of Aetna rose 2.5 percent to $158.54, helped by stronger
results not only for individual insurance but also in its small and
large business division and in its government-backed Medicaid and
Medicare segments. The company raised its full-year earnings
outlook.
While the individual business' financial results improved more than
expected, Aetna said it still anticipated losing money on the
Obamacare markets this year. The company has already shrunk that
business to 240,000 members from 1 million last year and will
completely exit it at the end of 2017.
Aetna Chief Executive Mark Bertolini said on CNBC that the
uncertainty about how and when the individual business will be
stabilized made it unsustainable for Aetna right now.
"When they get it right, which it can be fixed - it very much can be
fixed, and it's stable, we'll reconsider our participation,"
Bertolini said.
Republican leaders' effort to repeal and replace former President
Barack Obama's signature healthcare law failed dramatically in the
U.S. Senate last week, having barely passed the House of
Representatives in May. There are some bipartisan efforts in both
houses of Congress to stabilize healthcare markets, but it is
unclear how far these will advance.
Republican President Donald Trump has added to uncertainty by saying
he might cut off federal subsidies that help make the individual
insurance plans affordable for millions of Americans this year.
Bertolini said during a conference call with analysts that lawmakers
needed to commit to funding those subsidies in 2018 to help dispel
that uncertainty.
Bertolini said member costs could rise during the second half of
this year if individuals use more medical services because they are
worried about not being able to afford insurance without subsidies
next year. Many insurers have raised premium rates for 2018 by more
than 20 percent.
Aetna Chief Financial Officer Shawn Guertin said the company
expected to lose about $200 million on Obamacare plans this year, a
smaller loss than in 2016.
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Guertin said Aetna estimated its 2017 medical spending, excluding
the Obamacare business, to show a 6 percent increase from last year,
compared with its previous forecast range of a 6 percent to 7
percent rise. He attributed that decline in part to more plans based
on high deductibles, which shift the early costs of care to patients
before insurance kicks in, and lower care utilization.
Leerink Partners analyst Ana Gupte said Aetna's lower medical cost
trend reflected an industrywide view that spending will be less this
year. It may be due to an increase in so-called value-based
contracts that are focused on care quality rather than medical
services volume, she said.
"It feels like there is an acceleration in how value-based care is
playing out," Gupte said.
Aetna's second-quarter net profit rose to $1.20 billion, or $3.60
per share, from $791 million, or $2.23 per share, a year earlier.
Excluding special items, Aetna earned $3.42 per share, blowing past
the analysts' average estimate of $2.35, according to Thomson
Reuters I/B/E/S.
Revenue fell nearly 3 percent to $15.52 billion.
The company said it expected full-year earnings of $9.45 to $9.55
per share, excluding items. It previously had forecast $8.80 to
$9.00.
(Reporting by Caroline Humer in New York and Ankur Banerjee in
Bengaluru; Editing by Lisa Von Ahn and Richard Chang)
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