By TOM MURPHY
AP Health Writer
(CBS Connecticut and AP) – Aetna trumped third-quarter earnings expectations and raised its 2017 forecast again even as the health insurer’s withdrawal from the Affordable Care Act’s insurance marketplaces contributed to a revenue hit.
The nation’s third-largest insurer countered a 5 percent drop in revenue with cuts to its biggest expense, health care costs, and improvements in its Medicare Advantage business. Overall net income jumped 39 percent, to $838 million.
Aetna Inc. said Tuesday that its Medicare Advantage enrollment grew more than 7 percent to about 1.5 million people. Medicare Advantage plans are privately run versions of the government’s Medicare coverage program for the elderly.
Health insurance is Aetna’s main product, and most of its enrollment comes from commercial coverage sold through employers or directly to individuals. But the insurer and its competitors also have been growing their business tied to government-funded Medicare and Medicaid programs.
They’ve also been scaling back their presence in another government-backed market: the ACA’s marketplaces. The sign-up window for 2018 coverage starts Wednesday, and Aetna intends to sit that one out by completely leaving the market for next year.
Aetna once covered more than 900,000 people through the ACA’s insurance marketplaces, but it rapidly scaled back participation after being hit with steep losses. Insurers have struggled in those marketplaces with a sicker-than-expected patient population and not enough healthy customers, among other challenges.
Aetna’s ACA pullback and a moratorium on a health insurance tax contributed to a third-quarter revenue drop. On the flip side, the insurer’s health care costs fell 6 percent to $10.41 billion in the quarter.
Overall, Aetna reported earnings of $2.45 per share when adjusted for one-time charges and gains. Adjusted revenue, which excludes items like capital gains, fell to $14.95 billion from $15.74 billion.
Analysts expected earnings of $2.06 per share on $15.11 billion in revenue, according to Zacks Investment Research.
Aetna also said it now expects full-year adjusted earnings of about $9.75 per share, which is up from its projection in August for $9.45 to $9.55 per share.
The new forecast is well above Wall Street expectations. Analysts predict earnings of $9.55 per share for 2017, according to FactSet.
Aetna share climbed $2.77 to $174 in pre-market trading Tuesday, after the company detailed results.
Shares of the Hartford, Connecticut, insurer have climbed 38 percent since the beginning of the year. The stock price spiked late last week after the Wall Street Journal reported that drugstore chain CVS Health Corp. is interested in buying the insurer. Aetna made no mention of a possible CVS deal in its earnings report.
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