The Patient Protection and Affordable Care Act of 2010 (PPACA) is beginning to sting health insurers.
Aetna Inc., Hartford (NYSE:AET), and Assurant Inc., New York (NYSE:AIZ), both included comments about the effects of the PPACA minimum medical loss ratio (MLR) rules in their third-quarter earnings releases.
The PPACA MLR rules require insurers and health plans to spend at least 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts.
Aetna is reporting $490 million in net income for the quarter on $8.5 billion in revenue, compared with $498 million in net income on $8.5 billion in revenue for the third quarter of 2010.
Aetna ended the quarter providing or administering major medical coverage for about 18 million people, down 1.6% from the total recorded a year earlier.
Enrollment in personal health account plans increased 7.8%, to 2.4 million, but overall commercial plan enrollment fell 2.1%, to about 17 million.
The total commercial medical benefit ratio, or ratio of benefits to premium revenue, fell to 77.8%, from 80.5%.
Selling expenses fell 12%, to $269 million.
Joseph Zubretsky, the Aetna chief financial officer, said “fewer than 20%” of the company’s core commercial pools are in “MLR rebate status,” and that MLR considerations affect about 25% to 30% of the corresponding premiums.
Rebate exposure is highest for large group and lowest for small group coverage, Zubretsky said.
“A high percentage of our rebate exposure is concentrated in just a few of the pools,” Zubretsky said.