Aetna Inc. is enjoying the relative calm before what is expected to be the PPACA storm.
Aetna, Hartford (NYSE:AET), today reported $373 million in net income for the fourth quarter of 2011 on $8.6 billion in revenue, up from $216 million in net income on $8.5 billion.
Health care operating earnings increased to $362 million, from $280 million, in part because of “continued pricing discipline,” medical cost management efforts, and continuing low use of medical services, the company says.
One major provision in the Patient Protection and Affordable Care Act — the minimum medical loss ratio (MLR) provision, which requires carriers to spend at least 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts or else send customers rebates — has proved to be helpful in some ways, according to Aetna Chairman Mark Bertolini.
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Aetna has found that it can use the potential to pay out rebates as a tool for retaining business, Bertolini said during the company’s earnings call.
“If you have a profitable account, you want to price it at a reasonable increase to keep it,” Bertolini said.
In some cases, carriers that understand accounts well might offer what looks like aggressive modeling because MLR modeling as given them better knowledge of their books of business, Bertolini said.
Bertolini also noted that the company will be removing large-group broker commissions from MLR calculations.
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