Aetna Inc. posted a big net loss Tuesday, partly due to the failure of a long-term care insurer.
The Hartford, Connecticut-based insurer is reporting $381 million in net losses for the first quarter on $15.2 billion in revenue, compared with $737 million in net income on $15.7 billion in revenue for the first quarter of 2016.
The company says the net loss was the result of several unusual charges. Excluding the effects of the unusual charges, Aetna generated $939 million in earnings for the latest quarter, up from $821 million for the year-earlier quarter, according to company calculations.
Two of the big charges Aetna recorded in Q1'17 stemmed from the company's inability to get antitrust approval for the acquisition of Humana Inc.
Aetna faces $1.2 billion in costs directly related to the breakup of the Humana deal; it also spent $246 million to extinguish long-term debt early, partly tied to the failed Humana transaction.
Aetna also recorded a $231 million charge related to its share of cost of dealing with the insolvency of Penn Treaty American Corp.
State guaranty fund associations are supposed to provide some protection for the Penn Treaty policyholders affected by the insolvency. Only one state tries to fund its guaranty fund with regular guaranty fund bills. In other states, the funds impose assessments on the surviving insurers when a member insurer fails.
Other health insurers are recording similar charges.
Anthem Inc., for example, recently said it expects to pay $254 million in Penn Treaty failure assessments. Earlier, the company estimated it might pay just $190 million to $220 million for this expense.
Enrollment
Aetna ended the quarter providing or administering major medical coverage for 22.4 million people, down from 23 million people a year earlier.
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Enrollment at Aetna's fully insured commercial plans fell to 4.6 million at the end of the quarter from 5.8 million a year earlier. The drop was due mainly to individual commercial health coverage enrollment falling to 255,000, from 964,000 at the end of 2016.
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Enrollment in self-insured employer plans rose to 13.4 million from 12.9 million.
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Enrollment in Medicare supplement plans rose to 711,000 from 612,000.
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Medicare Advantage plan enrollment rose to 1.4 million from 1.3 million.
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Managed Medicaid plan enrollment rose to 1.6 million from 1.5 million.
Mark Bertolini, Aetna's chief executive officer, said during a conference call with securities analysts that the individual major medical enrollees Aetna still has appear to have significantly higher medical costs than the enrollees the company was covering a year earlier.
Losses on the individual commercial line are about what Aetna had expected, because enrollment is so much lower than it was last year, Bertolini said.
Aetna expects to reduce participation in the individual market further in 2018, the CEO explained.
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