Insurer Aetna sees Obamacare changes ahead; no word on Humana

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By Caroline Humer and Ankur Banerjee

<span class="articleLocation”>Health insurer Aetna Inc said on Tuesday
it lost more money than expected on the Obamacare individual
insurance plans, one of the main pillars of the Affordable Care
Act that President Donald Trump is working to “repeal and
replace.”

Aetna Chief Executive Officer Mark Bertolini also predicted
years of transition in that individual insurance business but
said it presents opportunities as new products are developed
that appeal to younger and healthier people.

Bertolini said the company is weighing how to proceed after
a federal court ruled last week against its $34 billion deal for
Humana Inc on antitrust grounds. He said
Aetna, the No. 3 U.S. health insurer, may decide to appeal or
there could be a deal extension, which it will announce before
the current Humana agreement’s end date of Feb. 15.

Aetna, along with UnitedHealth Group Inc, has
largely exited the individual business for 2017, but has
remained on exchanges in four states. It has 240,000 customers
in individual plans and said it expects to post a loss again
this year on the business.

Bertolini said in an interview that the Hartford,
Connecticut, company will not enter any new markets with
exchange Obamacare plans in 2018, and will decide in the next
few months if it will re-enter Delaware, Iowa, Nebraska and
Virginia, where it now sells these plans.

Like many insurers, he said Aetna feels structural changes
are needed to account for the higher medical costs of
participants in the Obamacare exchange market for individuals.
He said the company is talking to lawmakers and regulators about
how to make these changes as Trump and Republicans consider new
legislation and rules.

Aetna said it lost $450 million on the Obamacare business in
2016, including $100 million more than expected during the
fourth quarter. The company expects lower losses in 2017.

HUMANA STILL IN QUESTION

Aetna said it was still deciding how to proceed on Humana,
but analysts said they thought it was unlikely a deal would go
forward.

“Investors would want to know if they are extending the
agreement or not. Or if they are appealing or not,” Leerink
Partners analyst Ana Gupte said. “In some ways I think investors
don’t want any appeal. They want an accelerated share repurchase
and then to just move on.”

The U.S. Justice Department filed a lawsuit in July to block
Aetna’s purchase of Humana and Anthem Inc’s $54 billion
deal to buy Cigna Corp, saying they would raise prices.
There has been no ruling on Anthem’s deal yet.

Earlier on Tuesday, Aetna said fourth-quarter net profit
fell to $139 million, or 39 cents per share, from $321 million,
or 91 cents per share, a year earlier. That included a $215
million expense for a voluntary early retirement program.

Excluding items, Aetna earned $1.63 per share, above the
analysts’ average estimate of $1.44, according to Thomson
Reuters I/B/E/S.

Aetna’s medical benefit ratio, the percent of premiums spent
on claims, rose to 82.1 percent from 81.9 percent. The lower
that ratio, the more the insurer profits. The ACA mandates the
level be no lower than 80 percent.

Total revenue rose about 5 percent to $15.73 billion, but
missed the analysts’ average estimate of $15.86 billion.

The company said it expected 2017 operating earnings of at
least $8.55 per share. Analysts’ on average were estimating
$8.79.

Aetna shares were up 0.5 percent at $117.25 on Tuesday
afternoon.



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