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Aetna, Health Net look toward 2014

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Executives at Aetna Inc. (NYSE:AET) and Health Net Inc. (NYSE:HNT) are talking about efforts to use provider networks to cope with change.

Aetna hopes to use networks of providers who agree to take “value-based reimbursement” to drive membership growth in the face of a soft economy and the changes imposed by the Patient Protection and Affordable Care Act (PPACA), Aetna President Mark Bertolini said today during a conference call his company held to discuss results for the fourth quarter of 2012.

“Aetna continues to be a leader in enabling providers to change their business model from episodic acute care management to population management,” Bertolini said.

Jim Woys, the chief operating officer of Health Net, also talked about network management in a discussion of the performance of the California-based company in its Western region.

“Membership in ur commercial tailored network products continues to grow,” Woys said, in a statement accompanying the company’s earnings release. “We believe these cost-effective products will play a critical role as health care reform is implemented.”

Aetna, networks and 2014
Aetna already has set up 17 “accountable care organization” (ACO) collaboration agreements, has 32 ACO letters of intent in place, and has about 200 other ACO opportunities in the pipeline, Bertolini said.

“Obviously, as you can see from our ACO business and our narrow network business, we’re getting substantial discounts from the providers with which we’re contracting,” Bertolini said.

Aetna executives said the company will take a “measured approach” to deciding whether to participate in specific states’ PPACA health insurance exchanges, or Web-based insurance supermarkets for individuals and small employers, which are supposed to open for business Oct. 1.

Getting products like the exchange products approved typically takes about three months, but that could slow down as the Oct. 1 exchange startup date nears, Bertolini said.

Although the exchanges might be popular with individuals, it looks as if the only small employers that will jump to the exchanges will be employers that expect to get large subsidies, Bertolini said.

“We do see some potential for small groups to drop coverage” and send employees to the individual exchange programs, Bertolini said.

Even after the exchanges start up, about 20 percent of the individual market will operate outside the exchange system, and Aetna may continue to serve those off-exchange customers in states in which the company is not on the state’s exchange, Bertolini said.

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Aetna is reporting $190 million in net income for the latest quarter on $9.9 billion in revenue, compared with $373 million in net income on $8.6 billion in revenue for the fourth quarter of 2011.

The company ended the quarter providing or administering health coverage for 18 million people, about as many people as it was covering a year earlier.

Enrollment in commercial medical plans fell 2 percent, to 16 million.

Enrollment in plans that include health savings accounts or health reimbursement arrangements increased 6.8 percent, to 2.6 million.

Aetna expects to see growth this year in enrollment in group plans it runs for self-insured employers, but enrollment in insured group plans likely will fall, Bertolini said.

“We remain committed to our disciplined pricing model and when faced with a choice, we will continue to favor achieving target margins over membership growth,” Bertolini said.

Aetna executives noted that a bad flu season increased use of medical services in the fourth quarter but that the effects of Sandy offset the flu spike by depressing use of health care services in some major Aetna markets.

Health Net
Health Net is reporting $5.1 million in net income for the latest quarter on $2.8 billion in revenue, compared with $60 million in net income on $2.8 billion in revenue for the fourth quarter of 2011.

Total civilian health plan enrollment held steady at about 2.6 million.

Enrollment in Health Net’s TRICARE plan fell to 2.9 million, from 3 million.

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