Aetna’s Commercial Enrollments Declined by 0.11 Million in 4Q15
Disciplined Pricing, Growth Strategy Boosted Aetna’s 4Q15 Profits
Commercial enrollments
Aetna’s (AET) earned $7.1 billion in premiums from its commercial plans in 4Q15, which represents a year-over-year (or YoY) decline of 2.5%. The division’s revenues were approximately $28.7 billion for 2015, which represents a YoY increase of only 0.5%.
To learn more about Aetna’s commercial business, please refer to How Does Aetna Manage Its Commercial Business?
The above graph shows that in 4Q15, Aetna’s commercial risk membership declined sequentially by about 112,000 members. This was mainly due to weak performance in the small group and individual business segments. In 4Q15, commercial risk enrollments also declined YoY by 8.5% and reached about 5.8 million.
However, commercial fee-based enrollments or administrative services only (or ASO) enrollments rose by 0.63% from 13.5 million in 4Q14 to 13.6 million in 4Q15.
Outlook for 2016
In 2016, Aetna expects that its commercial fee-based enrollments will be lower by 750,000 members. About 40% of this membership loss is attributed to loss of its relationship with Assurant Health. On January 17, 2012, Assurant Health had entered into a multiyear agreement with Aetna, allowing Assurant’s customers to use Aetna’s health provider network. However, on June 10, 2015, Assurant announced its decision to exit the health insurance business so that it could focus on housing and lifestyle protection products and services.
Aetna’s commercial risk–based enrollments are also expected to drop by 180,000 members in 2016, as the company has strategized to prefer margins over membership in the small group segment. It also expects muted enrollment growth in the individual exchange business. Other health insurance companies such as UnitedHealth Group (UNH), Anthem (ANTM) and to a certain extent, Cigna (CI) are also expected to witness reduced commercial risk enrollments in 2016, due to low membership growth in the individual exchange business.
Aetna, UnitedHealth Group, Cigna, and Anthem make up 1.2%, 3.7%, 1.2%, and 1.1%, respectively, of the portfolio holdings of the Vanguard Health Care ETF (VHT). Hence, in the event of large losses in the individual exchange business, VHT may also witness low share prices due to the impact on the price of the component stocks.
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