Aetna CEO Supports Association Health Plans

 

Release Date: 9/13/2004

 

PHILADELPHIA (Dow Jones/AP) _ Aetna Inc. Chairman and Chief Executive John Rowe reaffirmed Monday the health insurer's 2004 operating earnings estimate of $6.75 to $6.85 a share.

The forecast, which excludes any adjustments to reserves for medical bills for prior periods, should leave Aetna with a pretax operating margin of roughly 9 percent, Rowe said during a Bear Stearns & Co. health-care investor conference carried over the Internet.

Rowe also voiced optimism about the company's expectations for adding 600,000 to 750,000 net new medical members this year, which would leave Aetna with a health-plan enrollment of 13.6 million to 13.8 million at year's end.

"We're very confident that we're going to be in that range," he said. Aetna now has 13.4 million medical members, two-thirds of whom are enrolled through self-insuring organizations, Rowe said. Aetna fully insures the rest.

Aetna sees growth opportunities among the nation's 45 million uninsured, including college students and part-time workers, Rowe said. It also sees opportunities to enroll people from among 33.3 million Medicare beneficiaries, roughly 30 million members of small or regional insurers and 55.8 million members of nonpublic Blue Cross and Blue Shield plans, and other markets, according to his presentation.

Rowe said he takes a different view from other major insurers on the issue of association health plans, which could insure the self-employed and workers in small companies by allowing small businesses to pool together to buy coverage. The Bush administration is pushing for association health plans, which it says would allow small businesses to receive the same discounts as larger ones.

Some insurers oppose association health plans on the grounds that small employers who already provide insurance will drop their current coverage to send workers to association plans, Rowe said.

The health insurance industry's trade group, America's Health Insurance Plans, has objected to legislation that would exempt association health plans from certain state regulations, and said AHPs could fragment the small group market by "siphoning off the young and healthy" and leaving the rest of the market "saddled with a comparatively older and sicker population to share."

But the Aetna CEO said he thinks the plans will be all right if health insurers are allowed to participate. Some legislation in Congress would prohibit that, he said.

"If we can have access to that market, we think we can be innovative and make it work," Rowe said.

Rowe also reiterated Aetna's strategy of reducing its share count this year, and noted that the company repurchased 5 million shares for $419 million in the first quarter.