Aetna breaks cycle of losses to post profits

The company credits cutbacks from unprofitable markets and premium increases for its renewed profitability.

By Robert Kazel, AMNews staff. March 10, 2003.

Aetna Inc., which sought for two years to battle back into consistently black ink through severe layoffs, hefty premium hikes and elimination of unwanted patients from its rolls, announced in February its efforts had paid off. The insurance company was profitable in every quarter of 2002 after losing money in every quarter of 2001.

Company executives said profits would continue during 2003, partly due to a new quality measurement and incentive program that will encourage its primary care doctors to comply with standards of care and that will give financial rewards based on patient satisfaction.

The company's turnaround plan was addition by subtraction, particularly subtracting unprofitable markets by pulling out or increasing premiums enough that unprofitable plan sponsors got out. As a result, the number of Aetna's commercial patients declined nearly 20% during 2002, and the company cut 10,700 jobs last year.

Aetna's health care group, which includes medical and dental plans, showed operating earnings of about $362 million for 2002, compared with an operating loss of $162 million for 2001. Health care costs dropped from $17.9 billion for 2001 to $12.5 billion for 2002. Revenues for 2002 were $19.8 billion, down 21% from $25.1 billion the previous year. The company expects revenues of about $18.5 billion this year.