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 24 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's health care segment accounts for about 95% 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. Medical products include HSA's and Aetna HealthFund's consumer-directed health plans.
The company's health care plans include behavioral health and employee assistance; Aetna Health Connections' disease management, 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 15 million members. It also provides vision plans, while PBM (prescription benefit solutions) are provided through a contract with Caremark.
The much smaller group insurance segment primarily offers life and disability coverage. Its products include basic and supplemental group term life, group universal life, supplementary or voluntary programs, and accidental death and dismemberment coverage.
Finally, the large case pensions segment (some 1% of sales) manages a variety of retirement products, primarily for tax-qualified pension plans.
In 2014, the company signed 24 new accountable care organization (ACO) agreements, raising its total ACO collaborative agreement numbers; it now serves some 900,000 members. It has collaborations under contract with such companies as Carilion Clinic, Banner Health Network, Inova Health System, and Memorial Hermann.
Altogether, Aetna estimates that it provides benefits, information, and resources to more than 45 million individuals.
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 more than 1 million doctors and 5,500 hospitals. The company also provides privately administered Medicare Advantage health plans in about 40 states and Washington, DC, and it offers Medicaid services in about 15 states.
Group insurance products are offered in 49 states; Washington, DC; Canada, Puerto Rico, and the US Virgin Islands. Network-based HMO and/or PPO plans are offered in 40 states and Washington, DC.
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.
The company owns or leases space in the greater Hartford, Connecticut, area; it also operates in Bethesda, Maryland; Bluebell, Pennsylvania; and has various field locations throughout the US and in several foreign countries.
Sales and Marketing
Aetna's health plan products are marketed primarily to corporate groups through direct sales representatives and independent brokers, agents, and consultants. The company targets its marketing efforts towards small, midsized, and large (multi-site) national employer groups.
Aetna also provides services to other insurance companies, governmental units, 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 27% of revenues.
Revenues have been climbing for the past four years. In 2013 the rise was largely due to the company's acquisition of Coventry Health Care, which led to a 29% increase in revenue. In 2014 revenue rose another 23% to $58 billion on growth in the commercial insured business. While the Coventry acquisition still helped contribute to the increase, so did price hikes as the company sought to recover fees and taxes mandated by the Affordable Care Act. Government premiums were $5.8 billion higher that year thanks to a higher number of Medicare and Medicaid members. Additionally, health care fees rose $689 million, due partly to the Coventry business.
The higher revenue led to a 7% rise in net income to $2 billion in 2014. This was partially offset by higher operating expenses. Cash flow from operations rose 48% that year to $3.3 billion (due, again, to the inclusion of Coventry's operations and a higher number of insured members).
Aetna's strategic goals include integrating the Coventry business, increasing customer engagement and partnerships, managing technology improvements, improving its relationships with health care providers, and participating in insurance exchanges in accordance with the Patient Protection and Affordable Care Act.
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.
In 2015 the company introduced its Aetna Whole Health plan in Washington. It had launched the same product in Austin, Texas, the year before.
Also in 2015, Aetna formed a new accountable care agreement with Value Care Alliance in Connecticut.
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 announced in mid-2015 plans to acquire smaller rival Humana for $37 billion. If the deal closes, Aetna will become an even larger national insurer, especially in the Medicare Advantage market; membership in that business will increase to 4.4 million. To address antitrust concerns, Aetna plans to divest certain assets worth billions of dollars.
In 2014, Aetna expanded its international presence when it acquired the InterGlobal Group (now operating under the Aetna brand), which specializes in international private medical insurance for groups and individuals in the Middle East, Asia, Africa, and Europe. Later that year it acquired bSwift, which provides a technology platform offering retail shopping for health insurance exchanges and employees across the US. bSwift also provides benefit administration technology and services to employers.
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 built 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.