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Aetna upbeat on exchanges, Humana purchase; group insurance clips earnings

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Aetna upbeat on exchanges, Humana purchase; group insurance clips earnings

Aetna Inc. CEO Mark Bertolini said Thursday that the Hartford, Connecticut-based insurer is on track to “break even” in its public health exchange business this year.

“We're getting growth in concentrated markets where we know we have a good, solid cost structure,” Mr. Bertolini said during an analyst conference call. “It would be silly for me to declare victory for the year sort of after the first quarter, but I think the markers that we can see on that business make us feel pretty good about the goal we've set for ourselves this year.”

Aetna ended the first quarter of 2016 with 911,000 members enrolled in its public exchange health plans. The insurer currently sells coverage in 15 states through exchanges that were established by the Affordable Care Act.

During the conference call, Aetna said about 55% of its public exchange enrollment is new business — particularly Florida, Georgia and North Carolina.

Mr. Bertolini said the public exchanges remain “a good investment,” though more work needs to be done to ensure long-term sustainability, which he thinks could be achieved if a new administration allows insurers more flexibility in developing exchange plans.

“We see (the exchanges) as a good investment, hoping that we have an administration and a Congress that will allow us to change the product like we change Medicare every year and we change Medicaid every year. We haven't been able to touch this product because of the politics, but if we get to that point, we believe we are in a very good place to make this a sustainable program,” Mr. Bertolini said.

First quarter earnings

Aetna's net income during the first quarter of 2016 fell 6.2% to $727.9 million, primarily because of lower operating earnings in its group insurance segment.

First-quarter revenue, however, increased 4.0% to $15.69 billion compared with the same quarter last year, including a 4.1% rise in health premium revenue, which rose to $13.47 billion.

Aetna ended the first quarter with total medical membership of 23.0 million members, a 3.0% decrease from the same time last year. Growth in its government businesses was offset by membership declines in its group commercial business, Aetna said.

Group commercial results were a bleak spot in Aetna's overall results: Net income for the group insurance business fell sharply to $23.4 million for the first quarter, compared with $45.8 million a year before as a result of lower underwriting margins on its disability insurance products, Aetna said.

During the conference call, Mr. Bertolini said Aetna has secured about two-thirds of necessary state approvals for its proposed acquisition of insurer Humana Inc., with six state approvals left to obtain.

He said Aetna remains on track to close the deal in the second half of this year.

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