Currently healthcare and insurance are intensely debated topics in the United States, especially with “Obamacare” being passed in spring 2010. Aetna, Inc. is a health insurance company taking advantage of Obamacare. They are heavily involved in public consumer insurance exchanges in sixteen states and the District of Columbia, the most areas covered by an insurance carrier (WSJ Matthews). These state exchanges act like a shopping mall for health insurance. Uninsured workers can go to the exchange to buy a health plan (Pallarito). Due to their size, is Aetna, Inc. management making responsible decisions through these exchanges? Do they really have their clients’ best intentions in mind or do they simply crave continuous growth?
There is an unexpected portion of the 135,000 paid members to require higher costs (WSJ Matthews). Their problems are “nothing alarming”, according to CEO Mark Bertolini, but Aetna already expects to lose money in 2014. The major issue of expecting not to make any profit for an entire year, with eleven months to go, and unknown projected profit margins in 2015, brings to mind whether or not Aetna is too large for its own well being. More importantly, their clients’ medical treatment is at stake as part of their business struggles.
The insurance company is slowly putting one of the largest priorities in an individual’s life in limbo: their physical and mental health. However, part of the problem is not just future costs. Because of Aetna’s inaccurate projections in the past for costs of health law exchanges, their expectations have been altered. Management needs to learn from their mistakes and be more thorough in their projections, as they influence the company’s decisions.
From a business standpoint, it is positive that “individual insurance represented just 3% of Aetna’s operating revenue and less than 1% of its earnings before interest, taxes, depreciation and amortization” (WSJ Matthews). However, the sources of the information in the Wall Street Journal article are from Aetna, raising a question of whether the company is at greater risk. Also, they could be downplaying the costs they are facing to insure customers in the years to come.
Aetna is not alone as Humana, Inc. expects to not be profitable in the health-law marketplace, as well. In the long run it does seem that success is possible for Aetna and Humana as Wellpoint, Inc. expects profits of 3%-5% in the marketplace in 2014 as a very large and prominent insurer (WSJ Matthews). It would be most logical for Aetna to halt their growth for a certain period of time to see if they can bring in the profits to succeed with health-law exchanges. There is a “mixed picture” of these new health-law exchanges as the article states, and this will be an intriguing topic to cover over the next few years.
Matthews, Anna Wilde. “Aetna Sees Losses on Insurance Exchanges.” 07 Feb. 2014: B4. Web. 7 Feb. 2014.
Pallarito, Karen. “HEALTH REFORM: Exchanges Will Be Cornerstone for Coverage Choices.” Consumer HealthDay. Web. 10 Feb. 2014.