Aetna says Humana merger on track, reports big gains in Medicare Advantage segment
All but six states have approved merger that would create largest insurer of Medicare Advantage plans in country.
Aetna expects its proposed $37 billion acquisition of Humana to close during the second half of 2016, Chairman and CEO Mark Bertolini said during an investor call Thursday while commenting on the insurer's first quarter financial results.
Aetna continues to cooperate with the Department of Justice and state regulators, Bertolini said.
"We now have approvals in six states remaining," Bertolini said. "Based on the progress to date, we believe we remain on track to close in the second half of 2016."
Acquiring Humana and its Medicare Advantage market poises Aetna to become the largest Medicare Advantage insurer in the country. Aetna reported solid growth in its Medicare and Medicare Advantage segments year over year, while overall medical membership declined by close to half a million members. Its 498,000 membership drop reflects a decline in Aetna's commercial products, the company said. Commercial medical membership fell from 19.8 million members in 2015 to 18.7 million, but Medicare Advantage membership grew from 1.2 million to 1.3 million.
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During the first quarter of 2016, Medicare Advantage added 127,000 members.
Also, the Medicare supplement and Medicaid segment grew. The Medicaid market includes dual eligibles.
Medicare Advantage realized a 9 percent individual market growth, which exceeds overall Medicare Advantage gains nationwide, Bertolini said.
"Medicare Advantage remains an important growth lever for Aetna," Bertolini said.
However, Bertolini said he remains concerned about the Center for Medicare and Medicaid Services planned rate cuts to the employer group waiver program, especially in 2018 when the cuts are phased in.
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Also, the star ratings for dual eligibles add unnecessary complexity, he said.
The exchange business is break-even this year, according to Bertolini, who expressed optimism in the market. Previously Aetna said it had concerns about whether the Affordable Care Act market was sustainable.
Aetna's operating revenues grew by 4 percent. Revenue was $15.7 billion for the first quarter of 2016 compared with $15.1 billion for the first quarter of 2015. The increase is primarily the result of higher premium yields and membership growth in Aetna's government business, partially offset by membership declines in Aetna's group commercial insured products. However, net income decreased: $726.6 million for the first quarter of 2016 compared with $777.5 million for the first quarter of 2015.
Aetna had 23 million members by the end of the first quarter and expects to have that number at the end of the year, according to the report.
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Operating revenue by the end of the year is projected at $63 billion, up from the $62 billion projected.
The company incurred transaction and integration-related costs of $42.9 million during the three months ended March 31, related to the acquisitions of Coventry Health Care, bswift LLC and the proposed acquisition of Humana.
"We started the year on a positive note, carrying over momentum from 2015 where we generated record annual operating earnings and revenues," Bertolini said.
Twitter: @SusanJMorse
