AETNA Forcing 600,000+ To Drop Coverage...Greed At Its Finest

Insurance giant AETNA bows to greed.

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Aetna Forcing 600,000-Plus To Lose Coverage In Effort To Raise Profits


Health insurance giant Aetna is planning to force up to 650,000 clients to drop their coverage next year as it seeks to raise additional revenue to meet profit expectations.

In a third-quarter earnings conference call in late October, officials at Aetna announced that in an effort to improve on a less-than-anticipated profit margin in 2009, they would be raising prices on their consumers in 2010. The insurance giant predicted that the company would subsequently lose between 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.

"The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering," said chairman and CEO Ron Williams. "We view 2010 as a repositioning year, a year that does not fully reflect the earnings potential of our business. Our pricing actions should have a noticeable effect beginning in the first quarter of 2010, with additional financial impact realized during the remaining three quarters of the year."

Aetna's decision to downsize the number of clients in favor of higher premiums is, as one industry analyst told American Medical News, a "pretty candid" admission. It also reflects the major concerns offered by health care reform proponents and supporters of a public option for insurance coverage, who insist that the private health insurance industry is too consumed with the bottom line. A government-run plan would operate solely off its members' premiums.

Aetna actually made a profit in 2009 but not at levels that it anticipated.

"They were surprised by an acceleration in medical costs in 2009 which pressured their earnings," Josh Raskin, an industry analyst for Barclays Capital, told the Huffington Post. "In an effort to get back to a more profitable level, they are raising their prices to match cost trends. When you raise rates, you run the risk of losing your membership. Health insurance is a very competitive marketplace."

As Williams told investors on the call: "The pricing that we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering."

Aetna is one of the largest insurers in the private market, covering roughly 17.7 million people according to its 2008 annual report. It is also a major player in the current health care debate and inside Washington D.C. The insurance company has spent more than $2 million on lobbying just in 2009, according to the Center for Responsive Politics.

American Medical News, which first reported the story, noted that this is not the first time the insurance giant has cut the rolls in an effort to boost profit margins. "As chronicled in a 2004 article in Health Affairs by health economist James C. Robinson, MD, PhD, Aetna completely overhauled its business between 2000 and 2003, going from 21 million members in 1999 down to 13 million in 2003, but boosting its profit margin from about 4% to higher than 7%."

A spokesperson at Aetna did not return calls and emails for comment.






Aetna prepares for loss of 600,000 members as it raises 2010 prices


Back when it was the largest private health plan in the country, Aetna downsized its membership by millions but boosted profits during an overhaul of its business several years ago.

Now it looks to be making a similar -- but smaller -- move with a planned price increase for many of its customers in 2010.

The company figures it will lose between 600,000 and 650,000 members next year because of the price hikes.

In a conference call with investment analysts to discuss the company's third-quarter earnings, Chair and CEO Ron Williams told analysts, "The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering."

Aetna President Mark Bertolini laid out how the company planned to raise prices to improve the company's profit margin. He said the firm had "implemented a combination of underwriting enhancements, pricing actions and plan design changes, intended to ensure that each customer is priced to an appropriate margin."

He predicted that Aetna would lose between 300,000 and 350,000 members from national accounts -- large businesses in multiple states -- because of businesses looking for "near-term cost savings." They would lose another 300,000 in smaller group accounts, which are medium- to small-size businesses.

Laying out specific expected membership losses is "pretty candid," said David Gibbs, a retired health insurance industry consultant from San Luis Obispo, Calif. He worked for and consulted with health insurers, including Aetna, for 25 years, and most recently was with New Jersey-based Health Economics Consulting Group.

He said Aetna's decision comes from a system that encourages insurers to drive away sicker members -- a strategy not unique to one insurer. "They're running a business, and their obligation is a very singular one: to increase shareholder profits."


Aetna is not alone

It's not unusual for executives to promise that profitability will take priority over membership growth. Some of Aetna's competitors are taking similar steps in 2010 and have done so in the past.

Angela Braly, WellPoint's president and CEO, told investors and analysts in 2008 that the company "would not sacrifice profitability for membership." She was referring to some insurers "buying membership" by reducing prices to boost overall growth.

Those kind of statements aren't rare, but it's less common for executives to be as specific as Bertolini was about how many members they expect to lose by raising premiums.

Because of the recession, health plans are treading a fine line between trying to keep membership numbers healthy and ensuring that the members they keep continue to generate a profit.

Most insurers have seen substantial membership losses due to recession-driven layoffs, and much of the decline has been in the more profitable commercial sector, while Medicaid and Medicare membership has grown.

Goldman Sachs investment analyst Matthew Borsch noted that Aetna has its work cut out.

"The repricing task is much tougher against headwinds of rising medical costs and declining health coverage, although the headwinds should ease next year," he wrote in a note to investors. "We expect Aetna to make steady progress on this front, but the progress may emerge more slowly than the more optimistic view would suggest."

Gibbs said simply raising prices probably would not get Aetna what it wants. That actually tends to result in sick people who are more "desperate" for coverage to keep it, and healthier groups to drop it. Instead, Aetna might change benefit designs, scaling back prescription drug coverage, for example, which sicker populations tend to value but healthier ones don't notice as much.

"There's a rule of thumb out there that 20% to 25% of the people account for 75% to 80% of health care costs," he said. "Avoiding that segment is probably the quickest route to making a lot of money."

Aetna's investors are eager to see a boost in the company's profits after 2009 brought unexpectedly high medical costs. In the third quarter of 2009, its medical-loss ratio -- the amount of each dollar spent on medical care -- was 85.6%, up from 80.9% over the same period in 2008.

Repeat move

This isn't the first time Aetna has taken this path to improved profitability.

As chronicled in a 2004 article in Health Affairs by health economist James C. Robinson, MD, PhD, Aetna completely overhauled its business between 2000 and 2003, going from 21 million members in 1999 down to 13 million in 2003, but boosting its profit margin from about 4% to higher than 7%.

Since then, the company has grown both its membership and its profitability. As of Sept. 30, Aetna had 19 million members. It remains the third-largest insurer behind UnitedHealth Group, with 32.9 million members, and WellPoint, which has 33.9 million members.

Aetna's profit margin has fallen, however, with a 6.9% margin for the most recent quarter, 7% in the second quarter and 8.8% in the first quarter.

Those are down from 10.3% for 2008 and 11.1% for 2007.

Williams said the company was aiming for a profit margin in the "high single digits" for 2010.

Analysts participating in Aetna's quarterly conference call asked Aetna executives about similarities between the strategy for 2010 and the company's moves earlier in the decade.

Bertolini said the reaction from customers was "different than happened seven, eight years ago. ... As we go into the marketplace with that pricing, we are watching each case closely. We get weekly reports, and the results so far are tracking with our expectations," he said.

Aetna spokesman Alfred Laberge declined comment beyond what executives said in the conference call, citing the company's decision not to give investors specific earnings guidance for 2010 until February.




Aetna cutting 625 jobs immediately, plans to make similar cuts by the end of 1st quarter 2010


Health insurer Aetna said Wednesday it will cut 625 jobs immediately, or nearly 2 percent of its staff, and will make a similar number of cuts by the end of the 2010 first quarter due to the lagging economy and the potential impact of health care reform.

Hartford, Conn.-based Aetna trimmed 977 jobs last December and currently has about 35,500 people. Several other large insurers, including Indianapolis-based WellPoint Inc. and Philadelphia-based Cigna Corp., also have announced cuts.

Health insurers have faced growing financial pressure in the past few quarters as corporate job cuts have trimmed the number of people covered by employer-sponsored health insurance. Many insurers project enrollment losses will continue into 2010 as the unemployment rate is projected to keep rising.

"This is something that's just industry wide right now," said Edward Jones analyst Steve Shubitz, who follows several insurers.

Aetna, the third largest publicly traded managed care company, saw medical enrollment grow 8 percent in the third quarter to more than 19 million people. But it expects to lose 225,000 people in the fourth quarter and another 650,000 in the first quarter of 2010, spokesman Fred Laberge said.

Aside from employer job reductions, Aetna also expects to lose some customers due to an increase in prices, Laberge said.

Aetna Chairman and CEO Ronald A. Williams said in a statement the insurer has to prepare for "the impact that health care reform and regulatory changes may have on our business."

Congress is debating plans to reform the health care system to cover more uninsured people. The insurer doesn't know what to expect from the debate, but it does know insurance market reform and tax increases are likely in the near term, Laberge said.

"We expect that would put additional pressure on our profit margins and our ability to invest for growth," the spokesman said.

Aetna expects to make similar job cuts in the first quarter, but Laberge said the exact amount and timing haven't been determined.

Aetna will book a $40 million restructuring charge related to the current layoffs. It will disclose the financial impact of future layoffs when those decisions are made.

Most of the cuts announced Wednesday will be made in Connecticut, where the company is headquartered. The company said it isn't exiting any of its markets as a result of the job cuts, but does expect to consolidate field offices in some locations in order to lower real estate costs.

The insurer made its announcement after markets closed Wednesday. The stock then fell 5 cents to $29.16 in after-hours trading.



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Sources: AETNA, Huffington Post, American Medical News, MSNBC, Newser, UPI, Google Maps

Health Care Insurance Companies Denied Coverage For Pregnancy & Acne...Blatant Discrimination

(Pres. Obama targets Health Care Insurance companies.)

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Acne, Pregnancy Among Disqualifying Conditions

A proposal to make preexisting health conditions irrelevant in the sale of insurance policies could help not just the seriously ill but also people who might consider themselves healthy, documents released Friday by a California-based advocacy group illustrate.

Health insurers have issued guidelines saying they could deny coverage to people suffering from such conditions as acne, hemorrhoids and bunions.

One big insurer refused to issue individual policies to police officers and firefighters, along with people in other hazardous occupations.

Some treated pregnancy or the intention to adopt as a reason for rejection.

As Congress and President Obama work on legislation to overhaul the nation's health-care system, one of their main objectives is to stop insurers from denying coverage on the basis of health status. Proposed legislation would prohibit insurers from denying coverage to individuals with preexisting conditions or charging them higher premiums because of their medical history -- practices known as medical underwriting.

Even the insurance lobby has endorsed that goal as part of a larger reform package in which the government would extend coverage to the uninsured, greatly expanding the market for insurance.

Guidelines that insurance companies have written for professionals involved in selling policies offer a glimpse inside the underwriting process.

"What these documents show is the lengths to which insurance companies are willing to go to make a profit," said Jerry Flanagan, health-care policy director of the advocacy group Consumer Watchdog, which distributed the documents Friday. "What it shows is that insurance companies want premiums without any risk."

Consumer Watchdog argues that consumers should be given the option of enrolling in a government-run health plan. It obtained the documents from a California insurance broker, Flanagan said.

A PacifiCare "Medical Underwriting Guidelines" document from 2003 lists under "Ineligible Occupations" such risk-takers as stunt people, test pilots and circus workers -- along with police officers, firefighters and migrant workers.

Uninsurable conditions included pregnancy, and being an "expectant father" was grounds for "automatic rejection." So was having received "therapy/counseling" within six months of the application. There was also this more general disqualifier: "currently experiencing/experienced within the last 12 months symptoms for which a physician has not been consulted."

The PacifiCare document "is completely outdated and predates the acquisition of PacifiCare by United Healthcare," Cheryl J. Randolph, a spokeswoman for the parent company, said by e-mail. She declined to provide current underwriting documents.

"Underwriting enables insurers to adequately assess risks, keeping premium costs lower for more consumers," she added.

Health Net guidelines for 2006 say that people could be denied coverage or charged higher premiums if they were taking certain medications, including Zyrtec, an allergy remedy, and Lamisil, which is widely advertised as a treatment for toenail fungus.

Pregnant women could be rejected, as could expectant fathers, the document said.

A Health Net spokeswoman did not respond to requests to comment.

Blue Cross of California guidelines for 2004 said potential disqualifiers included chronic tonsillitis and, under certain circumstances, varicose veins.

Kristin E. Binns, a spokeswoman for parent company WellPoint, said by e-mail that she could not comment on the guidelines because they are from years ago.



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Sources: Washington Post, MSNBC, Huffington Post, Google Maps

Health Care Insurance Companies Frequently Deny Eligible Claims For No Good Reason

(Rep. Kucinich (D-OH) Questions Execs. From 6 Of The Largest Insurance Co's On The Fatal Effects Of Denied Claims.)





In Health Care, Number of Claims Denied Remains a Mystery

Are health insurance companies generally being fair and honest when they reject claims from policy holders?

That would seem to be an important question in deciding how best to fix the U.S. health system. But it hasn’t been a focus of the raging health-care debate -- possibly because the answer is not publicly available.

“This is one of the dark corners of the black box that is private health insurance,” said Karen Pollitz, a professor at the Georgetown University Health Policy Institute.

Data on how often insurance claims are denied -- and for what reasons -- is collected and analyzed by the insurance companies themselves. But except in California, the companies aren’t required to provide those records to any state or federal agency. “The number is knowable, but not known by regulators or policy makers or patients,” Pollitz said.

The main Health-Care Reform bill being considered in the House does seek to address the matter. It would require health insurance companies to report data on claims policies, practices and denials to a central commissioner.

The issue of claims surfaced recently in California. The state Nurses Association issued a press release saying that data it obtained from the Web site of the state’s Department of Managed Health Care showed that in just the first half of 2009, California’s six largest HMOs had rejected more than 31 million claims -- 21 percent of those they had received.

The way the nurses group tells it, state officials didn’t even know they had the data.

Don DeMoro, a policy director for the nurses’ association, said that he received a phone call from the managed care department after its press release came out.

“They said, "You couldn’t have gotten this data from us. We don’t collect it ourselves,"” DeMoro said. “"The data is there," I told them, "but it’s hard to find." I walked them through the steps and waited while they clicked through their own Web site. Once they saw that the data was there, they politely said, "Thank you" and hung up.”

Lynne Randolph, spokesperson for the state agency, said she does not know what DeMoro might have been told, but said, “We’ve always known about this data.”

(To check the California data, go to the managed care agency's searchable financial reports. On the pull down menu, select "full service", choose a company name and "annual". When the list comes up, click on the company name and you will download a spreadsheet. The claims data is contained on the tab labeled ‘Schedule G.’)

In any case, Randolph contends that the nurses’ group misrepresented the meaning of what it found. She said the total number of “claims denied” include duplicate claims and claims that were eventually appealed and accepted, in addition to actual denials. “You can’t just look at the numbers in schedule G,” she said. “I guess it might look that way to a layman, but that data obviously does not reflect actual denials.”

Tim Labas, assistant deputy director in the Office of Health Plan Oversight at the state agency, estimated that the actual denial rate across the board in California is probably somewhere between 10 and 20 percent. “That might still seem high,” he said. “But there are legitimate reasons why claims are denied.”

The state officials said they consider the claims data they collect to be a kind of early warning system. If they notice large jumps in claims denials for an insurance company, they have the authority to request more specific information, said Mark Wright, an official in the health plan oversight office. The office said it could not cite an example of when it made such a request.

“We could require the insurance companies to report all of the data to us, but I think it would just be too much information for us to handle,” Wright said. “We’d be overwhelmed.”

The National Association of Insurance Commissioners (NAIC), whose stated mission is to “assist state insurance regulators, individually and collectively, in serving the public interest” said the group did not know the state reporting requirements for insurance companies, nor does it collect data on the actual number of claims denials.

State regulators tend to focus on individual complaints from consumers. But only a fraction of consumer problems with health insurance result in formal complaints.

A national survey published by the Kaiser Family Foundation in June 2000 found that 51 percent of those surveyed had experienced some type of problem with their health insurance, but only two percent had made a formal complaint. Nearly 90 percent of those surveyed could not name the agency that regulates health insurance in their state.

In recent testimony before the House Subcommittee on Domestic Policy, Pollitz, the Georgetown professor, said that collecting claims data is important because “regulators must be able to monitor patterns of health insurance enrollment and disenrollment in order to know whether insurers are avoiding or shedding.”

Robert Zirkelbach, spokesperson for the insurance industry’s trade association, America’s Health Insurance Plans (AHIP), said his organization had not taken a position on the proposed reporting requirement in the House bill.

AHIP represents, among others, UnitedHeathOne, Wellpoint, Inc., Aetna, Inc., Humana, Inc., CIGNA Healthcare, and the Health Care Service Corporation, all of whom sent executives to testify before the subcommittee on Thursday.

AHIP submitted testimony to the record as well, noting that the organization had completed an internal investigation of 700 million claims voluntarily submitted by 19 unnamed insurance companies in 2006 and found the denial rate to be only about 2.36 percent.

But Pollitz said that consumers and regulators, not insurers, need more “detailed, descriptive information about how coverage works.” This data about health insurance is generally lacking at both the federal and state levels.

Last year the House Committee on Oversight and Government Reform requested information from 50 state health insurance regulators. They found that most states didn't know the answers to basic questions. Only four states -- Hawaii, Kansas, Texas, and Washington -- knew how many times insurers had dropped people’s coverage. Only ten states knew how many individual health insurance policies were in effect in their jurisdictions. More than one-third of state commissioners did not know which health insurance companies even offered policies in their state. The federal agency responsible for maintaining health insurance standards and oversight, the Center for Medicare and Medicaid Services, does not gather compliance data, nor does it track state enforcement.

“It is time for the federal government to take a more active role in health insurance regulation,” Pollitz said.



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Sources: Huffington Post Investigative Fund, C-Span, Democratic Underground, OpenCongress.org, wpso.dmhc.ca.gov, Ohio Quotes, Insurance Finder, Day Life, Google Maps