Aetna Posts Q1 Loss After ACA Withdrawal, Merger Collapse
Healthcare insurance giant Aetna reported an enrollment drop after its ACA marketplace withdrawal, but raised its yearly outlook on rosy investment results.
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By - After a tumultuous 2016, Aetna announced a first-quarter 2017 net loss of $381 million, a significant reversal from a $737 million profit a year ago.
Aetna blamed the loss on costs associated with its attempted merger with Humana, although it did also hemorrhage member premiums, federal funds, and losses related to the temporary suspension of the health insurer fee (HIF) due to its departure from ACA markets in several states.
As stated in Aetna’s report to investors, “first-quarter 2017 results include several items that impact comparability with results in prior periods. The impact of these items resulted in a net loss for the period, despite strong overall results in Aetna’s underlying businesses.”
Aetna chairman and CEO Mark T. Bertolini put a brave face on the financial statement stating that it “demonstrates the power of the disciplined execution of Aetna’s strategy.”
“This strong start to the year has enabled Aetna to absorb continued pressure from our individual Commercial products while increasing investment in our growth initiatives and raising our full-year 2017 earnings per share projections,”he said.
Other executives reiterated the theme.
“Our increased shareholder dividend and accelerated share repurchase announced earlier this year speak to the strength of Aetna’s capital position and commitment to delivering strong returns for shareholders,” said Shawn M. Guertin, Aetna executive vice president and chief financial officer.
Adjusted earnings were up in 2017 to $939 million from $821 million for first-quarter 2016. Aetna reported that the double-digit adjusted earnings increase came from a strong performance in Aetna’s Health Care segment, despite the continued pressure in Aetna’s individual Commercial products described below.
Aetna’s Q1 results show the impact of its withdrawal from ACA marketplace exchanges. It was also affected by pricing actions to recover losses in ACA mandated fees and HIF.
This also impacted the number of health plan members. As of March 31, 2017, the member base was 22.4 million, a 664,000 member decrease from December 31, 2016.
Total revenue and adjusted revenue were $15.2 billion and $15.5 billion, respectively, for first-quarter 2017 and both $15.7 billion for first-quarter 2016.
The company’s Health Care Segment showed a before-tax income of $1.2 billion for first-quarter 2017 compared with $1.4 billion for first-quarter 2016.
Total revenue and adjusted revenue were both $14.8 billion for first-quarter 2017 and both $15.0 billion for first-quarter 2016.
The decrease in total revenue and adjusted revenue was primarily due to lower membership in Aetna’s ACA compliant individual and small group products and the temporary suspension of the HIF in 2017
Medical benefit ratios (MBRs), the amount paid out in claims, did increase for first-quarter 2017 and 2016 were for total health care a 2.1 percent increase from 80.5 to 82.6 percent with its commercial markets at 79.4 percent and 77.8 percent for a 1.6 increase in payouts.
Service levels of 57 days for payable claims was at 53 days for Q1, a decrease of four days compared with March 31, 2016. Aetna said the decrease came from operational improvements for new Medicaid contracts and decreased claims processing times tied to the member decline for individual health insurance policies.
Aetna stated to investors that lower membership numbers from ACA plans and lower premiums in Health Care were partially offset by other segments such as group insurance and pensions.
Group Insurance, which includes group life, disability and long-term care products, showed revenue of $621 million and $612 million for the first quarters of 2017 and 2016, respectively.
Aetna attributed the revenue increases to higher premiums in the life and disability product line, as well as a higher return on investment income.
Aetna’s Pension Segment also saw a bounce from $67 million in 2016 to $86 million for the first-quarter of 2017. Adjusted revenue was $86 million and $65 million for the first quarters of 2017 and 2016, respectively. The increases were due primarily from an increase in net investment income.
