Aetna profit falls on costs and legal settlement

HARTFORD, Thu Jan 31, 2013 — Aetna Inc. fourth-quarter earnings fell sharply, the health insurer said on Thursday, as costs rose in parts of its employer-based insurance business and it took charges for settling litigation over out-of-network payments.

The company said CFO Joseph Zubretsky will lead a new business internally. His CFO slot will be filled by Shawn Guertin, who has been with Aetna since 2011 and was previously CFO of Coventry Health Care Inc., which Aetna is buying.

The company announced plans in August for the $5.6 billion acquisition of Coventry, part of a strategy to expand in government-sponsored healthcare programs like Medicare.

Zubretsky, Aetna’s CFO for six years, will now have broader responsibility, managing new businesses such as coordinated care.

“He’s been very well respected as a CFO so now he’s heading up operations of their largest business unit,” said Sarah James, an analyst at Wedbush Securities.

Shares in Aetna were off 1.4 percent, or 69 cents, at $48.26 in morning trading.

Aetna said fourth-quarter net income slid to $190.1 million, or 56 cents per share, from $372.6 million, or $1.02 per share, a year earlier.

Profit took a hit from a $78 million after-tax charge for the $120 million settlement reached in December for the class-action lawsuit. Patients and doctors had accused Aetna of systematically underpaying claims.

Excluding special items, the company reported earnings of 94 cents per share. Analysts on average were expecting 95 cents on that basis, according to Thomson Reuters I/B/E/S.

Aetna said operating earnings fell in its commercial business as healthcare costs rose. Increased costs related to a severe flu season were offset by a decline in the Northeast of medical services after Superstorm Sandy, which shut down businesses, schools and public transportation for weeks or more.

Leerink Swann analyst Jason Gurda said in a research note the decline in healthcare earnings came as the company collected less money than expected in insurance premiums.

Aetna to pay up to $120 million to settle case over payments

HARTFORD, Conn., Fri Dec 7, 2012 — Aetna Inc. on Friday said it agreed to pay as much as $120 million to settle litigation over its practices on the payment of claims for services by providers with which Aetna does not have a contract.

The agreement calls for Aetna to pay $60 million, plus as much as $60 million more following a claims submission period that will begin after a court grants final approval to the settlement.

According to a court filing, the plaintiffs said Aetna improperly used third-party databases to systematically underpay claims involving services and supplies provided to members by out-of-network providers. The litigation also challenged other methods by which Aetna calculated out-of-network reimbursement rates, and its disclosures for how it calculated those rates.

Aetna to buy Coventry, expand Medicare/Medicaid business

HARTFORD, Conn., Mon Aug 20, 2012 – Health insurer Aetna Inc. said on Monday that it would buy rival Coventry Health Care Inc. for $5.6 billion to increase its share of U.S. government-backed Medicare and Medicaid business.

The purchase, which will add more than 5 million members to Aetna’s ranks, comes just weeks after rival WellPoint Inc struck a deal to buy Amerigroup Corp in a major expansion of its Medicaid business, administering the government’s health plan for the poor.

Bankers and investors see the wave of health insurer consolidation accelerating further as the United States moves to implement President Barack Obama’s healthcare overhaul.

The U.S. health reform law aims to provide coverage for 16 million more Americans through privately run insurance exchanges in each state and will expand Medicaid eligibility for an additional 16 million people by raising limits on household income.

“Integrating Coventry into Aetna will complement our strategy to expand our core insurance business, increase our presence in the fast-growing government sector and expand our relationships with providers in local geographies,” Aetna Chief Executive Officer Mark Bertolini said in a statement.

Under the deal, Aetna will pay $42.08 per share – $27.30 in cash and 0.3885 of its common shares. That is a 20.4 percent premium over Coventry’s closing stock price of $34.94 on Friday.

Aetna said the purchase would help lift its share of revenue from its government business to more than 30 percent from 23 percent.

It will help Aetna add nearly 4 million medical members and 1.5 million Medicare Part D members. Medicare Part D is a federal program that reduces prescription drug costs for beneficiaries of the government plan for the elderly.