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Aetna profit up 38 percent despite declines in ACA plan membership

Insurer did not address rumors of CVS takeover, but said decision on its pharmacy benefits manager would be announced by mid-2018.

Susan Morse, Senior Editor

Aetna's profit rose 38 percent for the third quarter despite lower revenues due in part to a planned reduction in Affordable Care Act membership, the company announced Tuesday.

Large group commercial business and Medicaid and Medicare lines were strong, resulting in a higher premium yield and net profit of $838 million this third-quarter compared to $604 million for the third-quarter of 2016, a 38 percent increase.

However, revenue decreased from $15.7 million in third quarter 2016 to $14.9 million in 2017, partly due to losses in individual commercial business, according to Tuesday's earnings call. 

[Also: CVS Health reportedly in talks to buy Aetna in a deal that would shake up the payer market]

CEO Mark Bertolini confirmed 2018 was a building year and to look to 2019 for growth, especially in Medicare.

"For 2018, we see opportunities in industry growth in Medicare Advantage," Bertolini said.

[Also: Anthem establishes its own pharmacy benefits manager]

Executives did not address rumors of a deal for CVS to buy Aetna for $66 billion. Vice President of Investor Relations Joseph F. Krocheski said at the start of Tuesday's call that they would not comment on rumors or speculation.

However, Wells Fargo analyst Peter Costa asked about Aetna's pharmacy benefit manager contract and Anthem's recent announcement to pair with CVS Health to establish its own PBM.
CVS and Aetna have an agreement for PBM services that runs through 2019.

[Also: Aetna sells its group life and disability business to The Hartford Group for $1.45 billion]

Anthem patterned its service after Aetna's PBM to leverage the buying CVS does for drugs, Bertolini said.

"We're not at all concerned about the relationship," Bertolini said, referring to Anthem and CVS.

Aetna will make its own internal decision on a PBM by the end of this year that will be announced by mid-2018, he said.

Last week, Aetna said it would sell its group life and disability business to The Hartford Group for $1.45 billion, in an acquisition is expected to close in early November. The move was to concentrate on its core businesses.

"Our tireless focus on service and quality are evident in the recently released 2018 Medicare Star Ratings," Bertolini said by statement. "For the third year in a row Aetna has the leading position among publicly-traded companies with the highest percentage of members in plans rated four stars or higher."

"The strength of our core business fundamentals in the third-quarter was driven by disciplined pricing, moderate medical cost trend and focused execution," said Shawn M. Guertin, Aetna executive vice president and CFO.

Twitter: @SusanJMorse
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