Aetna reports revenue dip, addresses Anthem-CVS deal

Mark Bertolini speaking
Aetna CEO Mark Bertolini said the insurer has until mid-2018 to make a decision about whether it wants to renew its contract with CVS.

Aetna’s revenue dipped in the third quarter, though it also beat analysts’ earnings estimates and raised its full-year outlook.

The insurer reported on Tuesday that its total adjusted revenue of $14.95 billion declined 5% compared to the third quarter of 2016, which it attributed to lower membership in its individual and small-group Affordable Care Act-compliant plans. Like other large for-profit insurers, Aetna has significantly reduced its footprint in the ACA exchanges in 2017.

Aetna’s net income for the quarter was $838 million ($2.52 per share), compared to $604 million ($1.70 per share) in the third quarter of 2016. Its adjusted earnings were $814 million, or $2.45 per share, beating Wall Street’s consensus estimate of $2.09 per share.

The company also raised its full-year earnings outlook to $9.75 per share, up from the $9.45 to $9.55 it predicted previously and beating the consensus estimate of $9.54.

Aetna’s Medicare Advantage plans “continue to be the main growth driver for the company,” CEO Mark Bertolini said during a call with analysts. To that end, it plans to expand into 128 new counties in 2018.

Bertolini did not comment on a recent report that CVS Health is in talks to buy the company, but he did offer some commentary about Anthem’s new pharmacy benefits management deal with CVS.

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Anthem’s deal with CVS is “very much patterned after ours,” Bertolini said, but the difference is that it includes a “very short exit” aimed at allowing Anthem to set up its own PBM operation.

“We’re not at all concerned about that relationship,” he said, noting that it could help increase CVS’ leverage with drug manufacturers and help keep costs low.

As for Aetna’s own PBM plans, Bertolini said the insurer has until mid-2018 to make a decision about whether it wants to renew its long-term contract with CVS once it expires in 2020.

Bertolini also echoed UnitedHealth CEO David Wichmann in expressing interest in the business opportunities tied to President Donald Trump's recent executive order, which aims to loosen certain ACA regulations.

"We're actually looking at re-energizing a program we had prior to the ACA," which would involve short-term plans rather than "skinny benefit" plans, he said.

"As soon as the executive order came out, we were on top of it," Bertolini added.