Aetna (AET) Chief Executive Mark Bertolini defended his company’s participation in ObamaCare public exchanges in 17 states as “a risk worth taking,” but worried that technical glitches in the federal government’s website would keep younger, healthy people from enrolling.
“The younger healthy people are not going to give (enrollment sites) more than one shot so it could mean adverse selection in 2014,” Bertolini said during a conference call Tuesday after the release of the firm’s third-quarter results.
Bertolini said Aetna is working closely with the Obama administration to “improve the exchange enrollment process.”
Aetna, the third largest health insurer in the U.S., said operating earnings fell 3% from the earlier year to $1.50 a share, missing analysts’ views by 3 cents.
But operating revenue jumped 46% to a little under $13 billion, above views. Medical membership grew 22% to 22.2 million as the company logged its first full quarter with government insurance-focused Coventry Health, which it acquired in May.
Aetna also reaffirmed per-share earnings guidance for 2013 of $5.85-$5.90, which would be a 14% increase at the mid-point vs. 2012. The implied Q4 EPS guidance of $1.33-$1.38 is about in line with views.
The company didn’t give specific 2014 guidance, but the CEO said the firm expects the “floor” on 2014’s per-share operating earnings to be consistent with 2013’s.
CFO Shawn Guertin added that any upside “could be more difficult” to achieve than in recent years as health-care utilization levels increase from their low levels.
Bertolini said cuts in government funding to Medicare Advantage programs would also likely pressure margins in 2014.
Aetna’s shares fell nearly 2%. WellPoint (WLP), the second-biggest U.S. insurer, fell more than 1%. No. 1 insurer UnitedHealth (UNH), which has a light exposure to public exchanges, rose 1%.
Aetna’s CEO said the public exchanges will not contribute to his company’s revenue and profits in a meaningful way next year but said they are “here to stay and we need to participate in some way.
“The amount of risk we’re taking is minimal to our overall results,” Bertolini said, noting that the company is most competitive in catastrophic and bronze-plan offerings.
“We worry about things like extended open enrollment and how long it goes on. We worry about the individual mandate not getting stronger,” Bertolini said.
“We think that participation of the full population is important. So the enrollment process and web site is incredibly important to get right.”
Bertolini was most excited about opportunities in private exchanges, which he said are more profitable than self-funded plans.
Date: October 29. 2013