Aetna expects to lose money on Obamacare exchanges despite recent pickup in business
Aetna Inc., the third-largest U.S. health insurer, said on Thursday it expects to lose money on the Obamacare exchanges even as demand for these insurance plans has picked up over the past few weeks.
President Barack Obama's health care reform law, often called Obamacare, created online insurance exchanges where individuals can buy health coverage with income-based government subsidies. The exchanges opened on Oct. 1 to sell plans for coverage effective Jan. 1, but technology issues delayed enrollment for the first few months.
Chief Executive Officer Mark Bertolini said the demographics of the new members were "a little skewed" toward an older, higher-cost population. He said the financial risks of the business were manageable but that Aetna's 2014 profit outlook was based on losses from the new plans.
"We expect the business to lose money in the first year," Bertolini told investors during a conference call. He said Aetna had signed up 135,000 paid members through the end of January.
The company also reported higher fourth-quarter earnings and revenue.
Aetna, which is operating on the exchanges in 17 states, is considering where it will offer Obamacare plans in 2015 — and at what price — as it gathers information on the health of the new members.
The company has been looking at these members' pharmacy records as well as the health records of previous Aetna customers to understand what its costs from Obamacare will be.
The website problems and the extension of some old health plans into 2014 have shrunk the pool of applicants for the exchange plans and diverted younger and healthier people.
HealthCare.gov, which sells insurance in 36 states, began working better in December, and about 3 million people had signed up through that site and in the 14 states running their own websites as of late January, the government has said.
About 6 million people are expected to sign up for 2014 on the exchanges, the Congressional Budget Office said earlier this week, cutting its outlook by about 1 million.
Another factor in 2015 pricing is the size of the network of doctors and hospitals. These networks have come under scrutiny as individuals have begun to realize their new plans may exclude their desired hospital or doctor.
The Centers for Medicare and Medicaid Services, which oversee the exchanges, this week outlined new expectations for 2015 network disclosures and standards that may be tougher for insurers to meet.
Aetna Chief Financial Officer Shawn Guertin said in an interview that he did not believe the administration was asking for larger networks in 2015 than the insurers use in 2014.
"I don't think we can conclude that yet from this letter," Guertin said. "This is not a new issue ... It's a longstanding issue of balancing access with affordability."