Aetna is again showing that the new insurance market, along with the business of health reform, can be profitable.
Aetna raised its forecast for investors after bringing in an all around profitable first quarter, with net income of $777.5 million, or $2.20 per share, an increase of 17 percent from 2014. The company now expects $7.20 to $7.40 a share in earnings for 2015, up from at least $7 a share in earnings--while its stock trades at a record high, more than $110.
"Aetna had a strong start to the year, growing medical membership, operating earnings and operating revenues to record levels in the first quarter of 2015," said CEO Mark Bertolini. Quarterly operating reached $15.1 billion, up 8 percent year-over-year, and $61-$62 billion is expected for the full year.
The company's health plan membership increased by 122,000 lives to 23.7 million, kicking off a third year of consecutive membership growth and continuing Aetna's place as the third-largest insurer. Although, as Bertolini said, "Aetna has consistently favored margin over membership in our group commercial business." The company's medical benefit ratio for the first quarter was 77.4 percent in commercial health plans, 81.3 percent for government-sponsored plans, and 79.1 percent overall.
Growth areas in membership have included Medicaid, which rose 6 percent to 2.1 million, and Medicare Advantage, which rose 11 percent to 1.23 million, with 85 percent of those seniors in MA plans rated at four or more stars.
This year, Aetna started Medicaid managed care contracts in Louisiana and New Jersey and counted 30,000 new beneficiaries in plans across various states that expanded eligibility. The company's Medicaid revenue is expected to grow by more than 15 percent.
On other side of ACA-driven business, the 2015 open enrollment period brought Aetna more than 950,000 members in public exchange plans sold across 17 states.
"We saw both market growth and taking business from competitors. It's a very competitive price market," said Aetna president Karen Rohan. "Over half of our membership we know is new to us."
Aetna ended the quarter with a total of 1.3 million members in individual plans, most of them in subsidized exchange products, as well in off-exchange, ACA-compliant plans. The individual segment will comprise about 6 percent of the company's total 2015 revenue, and possibly a small but healthy piece of profits.
"We remain cautiously optimistic on the potential for the public exchanges to develop into an attractive growth opportunity where we can continue to offer value to customers and generate a reasonable return for our shareholders," Bertolini said.
Meanwhile, Aetna is pursuing a varied and ambitious accountable care strategy, crafting ACO-based health plans--including a new one with Catholic Health Initiatives in Nebraska--and working with providers that want to take on their own risk.