Aetna Plans to Concentrate More on Self-Insured Business

As part of its "overall strategy to regain profitability," Aetna intends to decrease the number of small employers -- those with 50 or fewer workers -- it covers and "chase" medium and large employers, the Hartford Courant reports. Under the plan, Aetna wants to decrease the percentage of its insured accounts, for which the company takes responsibility for claims and "faces the challenge of pricing accurately to cover them." About half of Aetna's business is insured, with most insured accounts in HMO plans. The remainder of Aetna's business is self-insured, with Aetna administering those companies' health plans. In an internal memo, Aetna CEO John Rowe said, "[W]e will not abandon the health small business segment, but will target markets in which we are competitive, have a large market share and can achieve strong financial results" (Levick, Hartford Courant, 7/12). Aetna plans to "shed up to one million" of its nine million members in risk-bearing HMOs. Already, the company has closed managed care plans with a total of 44,000 members in 11 counties in central California and plans with 25,000 members in Macon and Augusta, Ga. In addition, Aetna sold managed care plans with 75,000 members in St. Louis and Louisiana to Coventry Health Plans Inc. (Freudenheim, New York Times, 7/12). But moving to more self-insured business could be "risky" because the administration fees employers pay are less than the premiums paid for insured accounts, Todd Richter of Banc of America Securities said. Richter added that an insurer that "chang[es] its business mix can end up losing its lowest-risk insured groups first" (Hartford Courant, 7/12).

More Profits
In another attempt to increase profits, Aetna has asked Connecticut regulators to approve premium increases of about 18.1% for HMO members and 32% for prescription drug plans in the state. Further, Aetna has asked regulators to approve changes in its pricing formulas that would allow the company to tie charges for larger groups of HMO members to the group's costs in the previous period (New York Times, 7/12). In the memo, Rowe said, "In 2003, Aetna will celebrate its 150th anniversary. My fervent wish is that, in two years, we will celebrate not only Aetna's birth but also its rebirth as we recapture our preeminent position in the marketplace." Aetna posted losses of $366 million in the first quarter of this fiscal year (Snider, Bloomberg News/Columbus Dispatch, 7/12).