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Aetna execs talk exchange chess

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A health insurer gave a little insight into public strategy today during a conference call with securities analysts.

Mark Bertolini, the chairman of Aetna Inc. (NYSE:AET) acknowledged that the Patient Protection and Affordable Care Act (PPACA) public exchanges have faced “widely publicized challenges” since they opened their enrollment sites Oct. 1.

Individual health insurance will account for just 3 percent of Aetna revenue in 2013, and, at this point, it does not look as though Aetna’s exposure to the individual business will increase in any meaningful way in 2014, Bertolini said.

The company made well-publicized efforts this summer to reduce the number of public exchanges it was using. In spite of that, Aetna is still selling at least some types of products through exchanges in 17 states.

Bertolini said the company determined which exchanges it would use by looking at factors such as the demographics of the people in a market, what percentage of the uninsured people in the market might be eligible for PPACA subsidies, how stable the regulatory and competitive environment are, and how competitive Aetna’s provider network is.

“Aetna’s products are most competitively priced in the catastrophic and bronze tiers and much less competitively priced in gold and silver,” Bertolini said. “We did not file any platinum plans, except where we were required to do so by law.”

That strategy should help Aetna manage any risk that emerges due to exchange plan or other individual plan problems, Bertolini said.

Bertolini and other executives noted that the company does not want to make many assumptions about what exchange plan enrollees or other new enrollees will be like.

In spite of the problems with the public exchange program, “we think it’s still worth participating,” Bertolini said. “We’re still engaged. We’re lending a hand in trying to get the enrollment process working.”

Bertolini also talked about private exchange programs that cater to employers.

Bertolini said he thinks the private exchange market is “not huge this year,” but is interesting. Eventually, he said, Aetna may trade some self-funded plan administration business for fully insured private exchange business…We view it as a fair trade, giving up the self-funded market for that fully insured opportunity.”

Bertolini talked about exchange strategy while discussing Aetna’s third-quarter earnings.

Aetna is reporting $519 in net income for the quarter on $13 billion in revenue, up from $499 in net income on $8.9 billion in revenue for the third quarter of 2012.

The company ended the quarter providing or administering health coverage for 22 million people, up from 18 million a year earlier.

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