Life, death, health, or injury -- Aetna's got an insurance policy to cover it. The company, one of the largest health insurers in the US, also offers life and disability insurance, as well as retirement savings products. Its health care division offers HMO, PPO, point of service (POS), health savings account (HSA), and traditional indemnity coverage, along with dental, vision, behavioral health, and Medicare and Medicaid plans, to groups and individuals. The health care segment covers some 22 million medical members. Aetna's group insurance segment sells life and disability insurance nationwide, and its large case pensions segment offers pensions, annuities, and other retirement savings products.
Aetna offers traditional health plans, dental plans, Medicare prescription drug coverage (known as Part D), and Medicare PPO group accounts nationwide, with a care network encompassing 1 million doctors and 5,400 hospitals. The company also provides privately administered Medicare Advantage health plans in about 35 states, and it offers Medicaid services in about a dozen states through subsidiary Schaller Anderson.
Overseas, the company manages a health plan provider in India and offers coverage for expatriates (Americans working overseas) through Aetna International. Though its international operations currently account for a small fraction of sales, Aetna International has grown to serve about 400,000 customers in more than 100 nations.
Aetna's health care segment accounts for more than 90% of sales. About two-thirds of Aetna's plans are provided on an ASC (administrative services contract) basis, where employer groups take on the medical cost risks, while the remaining third are fully insured contracts.
Specialty health plan units include Aetna Student Health, which offers health programs for college students; the Strategic Resource unit, which provides limited benefit plans for hourly or seasonal employees; and Cofinity, which manages provider networks for other health plans and employer groups. Outside its core medical plan offerings, Aetna is one of the largest dental insurance providers in the country, serving some 14 million members. It also provides vision plans, while PBM (prescription benefit solutions) are provided through a contract with Caremark.
Aetna's Accountable Care Solutions (ACS) division, which operates under the Healthagen brand (launched in 2013) and includes its ActiveHealth and Medicity subsidiaries, provides health care-related IT solutions including disease management and health information exchange (HIE) programs.
Altogether, Aetna estimates that it provides benefits, information, and resources to more than 44 million individuals.
Sales and Marketing
Aetna's health plan products are marketed primarily to corporate groups through direct sales representatives and independent brokers. The company targets its marketing efforts towards small, midsized, and large (multi-site) national employer groups.
Aetna also provides services to other insurance companies and labor groups, as well as individual customers including college students, part-time workers, and families. Its Medicare and Medicaid plan offerings make the US government Aetna's largest customer, accounting for 20% of revenues.
Aetna experienced an 8% revenue increase in 2012 to some $36.6 billion due to higher commercial premium rates (despite lower membership levels) and increased Medicare premiums (due to higher Medicare Advantage enrollment and a 2011 Medicare supplement acquisition). Revenue growth was also attributed to a one-time large case pension premium of some $941 million. Net income decrease nearly 17% to some $1.7 billion, however, due to lower underwriting margins on commercial health plans.
Aetna's results in 2012 are a reversal from 2011, when revenues dropped about 1% due to lower membership numbers in its commercial and Medicare segments (largely offset by gains from acquisitions) and profits rose about 12% due to pricing and cost management efforts and lower patient service-utilization levels.
Though Aetna primarily provides insurance through large, employer-sponsored programs, the shifting US health care landscape has also prompted Aetna to step up its marketing efforts to individuals and small businesses in response to increasing product demand in these segments. In addition, Aetna is expanding its Medicare and Medicaid operations by expanding its coverage into new states and regions through organic and acquisitive means.
The company is also working to expand its health plan offerings in ways that mitigate rising health care costs for clients by shifting risk and decision-making responsibility onto patients. For instance, its HealthFund consumer-directed offerings combine high-deductible plans with medical expense funds (such as HSAs). Aetna is also working to grow its health information technology (HIT) operations through its ACS division, which aims to reduce un-necessary medical expenses through IT and patient management systems. The ACS division is focused on partnering with care providers to help them set up accountable care organizations (ACOs) under new government health laws.
Aetna is also looking to join a larger industry trend of health insurers heading overseas to create revenue in the face of changes to US health care reform laws. The Aetna International unit is widening coverage of expatriates by creating new plan options and by entering new service territories, especially in emerging markets such as India, China, and Africa.
Mergers and Acquisitions
Aetna expanded its Medicare and Medicaid operations in 2013 when it acquired Coventry Health Care through a $7.3 billion deal. Aetna gained Coventry's extensive Medicare and Medicaid businesses and build out its local commercial networks in order to prepare for consumer insurance exchanges. The purchase added some 4 million medical plan customers and 1.5 million Medicare Part D members. Following the purchase, Coventry is operating as a subsidiary of Aetna; its operations will gradually be integrated into the Aetna organization. Aetna sold its Medcaid operations in Missouri earlier in 2013 to meet regulatory requirements for the deal.
In early 2011 Aetna completed an acquisition that works towards one of its main goals -- making health care more affordable and accessible through accountable care solutions -- with the purchase of health care IT firm Medicity for about $500 million. Medicity gives Aetna the capacity to provide HIE platforms for physicians and hospitals to share patient information.