Aetna on Thursday reported second-quarter earnings including a revenue increase from $15.5 billion in the second quarter of 2017 to $15.6 billion in Q2 this year. The payer said it enjoyed higher revenue in its healthcare segment, which was substantially offset by lower revenue after the company sold its group insurance segment in the fourth quarter of 2017.
The insurer saw a 1% net income increase and finished the second quarter with $1.2 billion. The company said the sale of its domestic group life insurance, group disability insurance and absence management business was substantially offset by capital losses and the payer dipping into reserves last year for “anticipated future losses on discontinued products in 2017 compared to 2018.”
A day before the release, California Insurance Commissioner Dave Jones recommended that the Department of Justice block Aetna’s proposed $69 billion merger with CVS Health.
Overall, the earnings showed similar revenue and income numbers from a year ago with fewer members in medical and pharmacy benefit manager plans. The company held no conference call because of the pending sale to CVS and said it doesn't plan on having calls in future quarters.
The company’s revenue benefited from Medicare products, but was hurt by leaving the Affordable Care Act exchanges and lower Medicaid enrollment.
Aetna said its healthcare income before taxes dropped to $1.5 billion from $1.7 billion year-over-year. The company blamed the revenue miss on its government products in the second quarter. Aetna also pointed to its Medicare growth initiatives and lower than expected risk-adjustment payments for the individual and small group markets.
The payer improved its medical benefit ratio in commercial (78.5% to 77.1%), but saw its government MBR increase (81.3% to 81.8%). Overall, the rate improved year-over-year (80% to 79.7%).
The improved commercial numbers are connected to the reinstatement of the health insurance fee for 2018 and new accounting guidance. The government MBR increased because of “lower favorable development” of healthcare cost estimates for the quarter and the new Medicare business mix.
Aetna’s medical membership dropped slightly year-over-year and finished the quarter at 22 million members. The decline came from commercial plan members. Total membership was slightly less than 7.6 million, below the end of the first quarter (7.6 million) and end of Q4 of 2017 (8 million).
Commercial and Medicaid members both declined in the insured plans. Aetna increased its Medicare Advantage to 1.7 million members.
However, Aetna increased its commercial administrative services contract (ASC) plan members. This growth is similar to Humana, which said during its second-quarter earnings call Wednesday it is seeing more interest in its administrative services only contracts from small group accounts.
Aetna also saw fewer members in its PBM plans in the second quarter. Overall, those plans dropped from 13.8 million members at the end of 2017 to 13.1 million members in the second quarter.
The payer had fewer members in its commercial and Medicaid pharmacy plans, but improved membership numbers for its stand-alone Medicare prescription drug plan and MA prescription drug plan.
California commissioner opposes CVS deal
Meanwhile, California's insurance commissioner recommended the DOJ reject Aetna’s merger plan with CVS Health because of “anti-competitive impacts” on consumers and health insurance markets.
The $69 billion proposed deal is expected to close in the second half of this year. Company officials appeared before Congress in late February to discuss the acquisition.
Jones held his own public hearing on the proposal in June, where the American Medical Association spoke out against the deal. Jones said that since the hearing his department has conducted reviews and analysis of the testimony, studies and written comments before making his decision.
Jones found competitive concerns in the Medicare Part D, PBM and retail pharmacy markets. The commissioner warned the merger could increase costs. "A merger of this size and type, according to experts on health insurer and healthcare mergers, will likely lead to increased prices and decreased quality,” he said.
The merger will also remove Aetna as a PBM competitor. That market is already concentrated, Jones said.