Life, death, health, or injury -- Aetna's got an insurance policy to cover it. The company, one of the largest health insurers in the US, also offers life and disability insurance, as well as retirement savings products. Its health care division offers HMO, PPO, point of service (POS), health savings account (HSA), and traditional indemnity coverage, along with dental, vision, behavioral health, and Medicare and Medicaid plans, to groups and individuals. The health care segment covers some 18.5 million medical members. Aetna's group insurance segment sells life and disability insurance nationwide, and its large case pensions segment offers pensions, annuities, and other retirement savings products.
Aetna's health care segment accounts for more than 90% of sales. Health plan products are marketed primarily to corporate groups through direct sales representatives and independent brokers. About two-thirds of Aetna's plans are provided on an ASC (administrative services contract) basis, where employer groups take on the medical cost risks, while the remaining third are fully insured contracts.
Specialty health plan units include Aetna Student Health, which offers health programs for college students; the Strategic Resource unit, which provides limited benefit plans for hourly or seasonal employees; and Cofinity, which manages provider networks for other health plans and employer groups. Outside its core medical plan offerings, Aetna is one of the largest dental insurance providers in the country, serving some 14 million members.
The Aetna Aligned Care Solutions division includes its ActiveHealth and Medicity subsidiaries, which provide health care-related IT solutions including disease management and health information exchange (HIE) programs.
Aetna offers traditional health plans, dental plans, Medicare prescription drug coverage (known as Part D), and Medicare PPO group accounts nationwide. The company also provides privately administered Medicare Advantage health plans in about 35 states, and it offers Medicaid services in about a dozen states through subsidiary Schaller Anderson. Overseas, the company manages a health plan provider in India and offers coverage for expatriates (Americans working overseas) through Aetna International.
Aetna's efforts to lower the costs of care have paid off in recent years, with profits rising about 12% in 2011 to some $2 billion due to pricing and cost management efforts and lower patient service-utilization levels. However, revenues dropped about 1% to $33.8 billion that year due to lower membership numbers in its fully insured commercial and Medicare health plan segments, though those losses were largely offset by gains in membership from acquisitions.
The firm first began experiencing a downturn in its Medicare operations in 2010 when Centers for Medicare and Medicaid Services (CMS) ordered Aetna to temporarily cease marketing and enrollment efforts for new Medicare patients (though it continued to serve existing members) while it resolved compliance issues related to its prescription plans. Aetna was allowed to resume full Medicare enrollment in mid-2011, but its overall 2010 and 2011 Medicare enrollment and revenue levels were negatively impacted due to the CMS measures.
As the US health care market evolves, the company is expanding its health plan offerings, particularly in ways that mitigate rising health care costs for clients and that shift risk and decision-making responsibility onto patients. For instance, its HealthFund consumer-directed offerings combine high-deductible plans with medical expense funds (such as HSAs). Though the company primarily provides insurance through large, employer-sponsored programs, the shifting US health care landscape has also prompted Aetna to step up its marketing efforts to individuals and small businesses in response to increasing product demand in these segments.
In addition, Aetna is expanding its Medicare and Medicaid operations by expanding its coverage into new states and regions. To meet its clients' rising demand for cost-control solutions, Aetna is also working to grow its health information technology (HIT) operations, including its ActiveHealth unit, which aims to reduce un-necessary medical expenses and encourage proactive member engagement.
Though its international operations currently account for a small fraction of sales, Aetna is also looking to join a larger industry trend of health insurers heading overseas to create revenue in the face of changes to US health care reform laws. Through Aetna International, Aetna has widened coverage of expatriates by creating new plan options and by entering new service territories, especially in emerging markets. For instance, the unit has established a presence in India, China, and Africa. Aetna International serves about 400,000 customers in more than 100 nations.
To focus on its core growth initiatives, in 2011 Aetna contracted out the administration of its pharmacy benefits management (PBM) unit's operations to Caremark, stating that the partnership would allow for superior clinical management and drug pricing programs. The PBM division provides prescription services to more than 9 million members; it also includes Aetna Specialty Pharmacy (delivery of high-tech medications to patients with chronic diseases) and Aetna Rx Home Delivery (mail-order pharmacy services).
Mergers and Acquisitions
Aetna intends to further its Medicare and Medicaid expansion strategy with the planned acquisition of Coventry Health Care. The company has agreed to a $7.3 billion deal to gain Coventry's Medicare and Medicaid businesses and build out its local networks in order to prepare for consumer insurance exchanges. Further efforts to grow in the Medicare market (and to make up for the enrollment lull caused by the CMS sanctions), Aetna paid $290 million in 2011 to buy up Continental Life, the Medicare supplement business of Genworth Financial, adding some 145,000 members.
Also in 2011, Aetna increased its ASC health plan offerings when it purchased Prodigy Health Group, a third-party administrator of self-funded health and dental plans, for some $600 million from private investment firm One Equity Partners. The purchase added some 570,000 medical and 375,000 dental customers and allows Aetna to provide more affordable employee coverage options for small and midsized business customers. Later that year Aetna bought PayFlex, an administrator of consumer-directed health spending accounts, for $202 million.
In addition, in early 2011 Aetna completed the acquisition of health care IT firm Medicity for about $500 million. The purchase allows Aetna to provide HIE platforms for physicians and hospitals to share patient information, which works towards the overall goal of lowering health care costs (and also qualifies care providers for government stimulus money). Following the acquisition, Medicity and ActiveHealth were grouped into the new Aetna Accountable Care Solutions division, which is focused on partnering with care providers to help them set up accountable care organizations (ACOs) under the new government health laws.
Aetna's established the company's first non-expatriate operations in India through the 2011 acquisition of Indian Health Organization (IHO), which has about 80,000 members and offers medical and dental care through a network of roughly 3,000 providers. – less