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 segment 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. It covers some 45 million medical members. Aetna's Large Case Pensions segment offers pensions, annuities, and other retirement savings products. In what was the largest health insurance deal in history, retail pharmacy giant CVS acquired Aetna for $69 billion in late 2018.
Change in Company Type
In December 2017, CVS struck a deal to acquire Aetna in what has been seen as a move to fend off potential pharmaceutical competitor Amazon. The deal allows CVS to further expand the health care services it offers, as well as providing it with more leverage in negotiations for drug prices.
Aetna operates through two primary segments: Health Care and Corporate/Other. Until 2018, it also operated through its Group Insurance and Large Case Pensions segments.
Aetna's Health Care segment accounts for more than 95% of sales. About two-thirds of Aetna's plans are provided on an administrative services contract (ASC) basis, where employer groups take on the medical cost risks, while the remaining third are fully insured contracts. Medical products include HSAs 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 14.5 million members. It also provides vision plans, while pharmacy benefit management (PBM) services are provided through a contract with
Aetna has several accountable care organization (ACO) agreements, serving some 900,000 members through these arrangements. It has collaborations under contract with such companies as Duke Health,
The Corporate/Other segment includes the rest of Aetna's operations. In November 2017, Aetna sold most of its Group Insurance segment's business to The Hartford for $1.45 billion. That transaction included its domestic group life insurance, group disability insurance, and absence management businesses. Corporate/Other also includes the operations of Aetna's former Large Case Pensions segment. Through that business, the company manages a variety of retirement products, primarily for tax-qualified pension plans. Aetna doesn't actively market these products but continues to work with existing customers and manages the run-off operations.
Altogether, Aetna estimates that it provides benefits, information, and resources to nearly 38 million individuals.
Aetna offers traditional health plans, dental plans, and Medicare PPO group accounts nationwide, with a care network encompassing more than 1.3 million doctors and some 5,700 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, Guam, and the US Virgin Islands. Network-based HMO and/or PPO plans are offered in 40 states and Washington, DC.
Overseas, the firm 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 more than 700,000 customers worldwide.
The company operates in the greater Hartford, Connecticut, area; Bethesda, Maryland; and Bluebell, Pennsylvania. It also 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 nearly half of all health premium income.
Aetna's revenues had been on the climb until 2017, when revenue fell 4% to $60.5 billion. This was due to a drop in health care and other premiums, as well as the November 2017 sale of the group insurance operations.
Although adjusted earnings increased in 2017, overall net income fell 16% to $1.9 billion. That decrease was largely driven by costs associated with the failed merger attempt with Humana, including a $1 billion breakup fee Aetna paid to Humana. Operating cash outflow totaled $464 million, versus an inflow of $3.7 billion in 2016, due to negative changes to assets and liabilities including income taxes, health care and insurance liabilities, and other assets and liabilities.
Aetna's strategic goals include increasing customer engagement and partnerships, managing technology improvements, and improving its relationships with health care providers. In 2018 it expanded its Medicare operations to 1,317 counties in 40 states and Washington, DC. On the other hand, the company has ended its participation in Affordable Care Act individual insurance exchanges. It also sold its entire Medicare Part D prescription drug coverage to WellCare (to quell concerns around its acquisition by CVS).
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 measures.
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 unnecessary 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.
To improve its members' overall wellness experience, Aetna partnered with Apple in 2016 to combine its analytics-based wellness and care management programs with Apple's watch, smartphone, and tablet applications.
Aetna is also looking to join a larger industry trend of health insurers heading overseas to create revenue in the face of 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. In 2017 the company purchased Bupa Thailand to significantly expand its operations in Asia.
To further hone its focus on health insurance, Aetna sold its domestic group life, group disability, and absence management operations to The Hartford for $1.45 billion in November 2017.
Mergers and Acquisitions
Aetna's planned $34 billion acquisition of smaller rival Humana was torpedoed by a US judge in early 2017 on antitrust grounds. Aetna subsequently paid Humana $1 billion in breakup fees.
Later that year, Aetna acquired Bupa Thailand, broadening its presence in Asia. The purchase aligns with Aetna's plans to go more deeply into local health care markets around the world.
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