Aetna: Medicare Advantage cuts, insurance tax will affect earnings

Aetna is warning a reduction in federal Medicare Advantage payments and the new health insurance tax likely will cut into insurers' earnings next year. And the third-largest insurer hopes its strategy for operating on the health insurance exchanges will offset those losses.

"Medicare Advantage rate pressure in 2014 will present a meaningful challenge for the program," Aetna CEO Mark Bertolini said in an earnings call with analysts. He added Aetna will pay about $600 million in insurance fees, the Associated Press reported.

But Bertolini said Aetna's exchange strategy should help shield the company from too much risk associated with the new online marketplaces. Less than 3 percent of Aetna's revenue comes from individual and small group business. "Right now, this isn't a big exposure for us," he told investors, reported Bloomberg.

Despite all the technical challenges with the exchange website, Bertolini said it's still worth participating. "We're still engaged," he said, noting Aetna has been "lending a hand in trying to get the enrollment process working," according to LifeHealthPro.

Bertolini was among several insurer CEOs who agreed to join forces with the Obama administration, lending their technology experts to help repair the exchange problems.

Aetna reported net income of $518.6 million in the third quarter, a 4 percent increase from $499.2 million in 2012, the company said in its earnings report released yesterday.

To learn more:
- here's the Aetna earnings report
- read the Associated Press article
- see the Bloomberg article
- check out the LifeHealthPro article


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