You may have heard the stories a couple days ago that Aetna Insurance lost a lot of money . . . because of having to pay out more than expected in employee claims. You may have turned the page or also been puzzled, but I got a bit curious about the dynamic.
Here are two versions of the story.
Aetna Cuts Forecast on Medical Costs, Shares Fall July 27, 2009
Aetna Inc (AET) slashed its full-year earnings forecast on Monday because of higher-than- projected medical costs, sending its shares down more than 5 percent as the health insurer also posted a 28 percent drop in second-quarter net income.
. . .
Hartford, Connecticut-based Aetna said higher medical costs stemmed from the use of more services in the emergency room, laboratory and preventive services, which is a continuation of issues cited earlier this year.
Or try this version of the story.
The second-quarter 2009 operating earnings were affected by significantly higher Commercial medical costs, which reflect higher second quarter 2009 medical costs and additional unfavorable reserve development, primarily from 2008. These factors resulted in a lower Commercial underwriting margin in the company’s Health Care business.
Each version is mostly taken up with financial jiggering that Aetna plans to do to ensure that it makes a profit.
Why, you might ask, did Aetna lose so much money, and what was it that Aetna failed to foresee?
A plausible and interesting explanation I've heard is that this loss is connected with continuing high layoffs / job losses and the fact that our health coverage is tied to having a job.
So here is how things apparently played out.
Employees learn they are about to be laid off and know that they are about to fall off a cliff in terms of medical coverage. What would you do? If you had sufficient warning, you would darn well use whatever health coverage remaining to ensure you had your checkups, prescriptions filled, tests, whatever you needed while you still had health coverage. You'd sure want to do it before you get into COBRA hell. This particular circle of hell is for those who realize just how much health insurance really costs when they have to pay the whole freight.
Each story says that Aetna is taking steps to ensure these problems - i.e. paying out too much money in claims - don't happen again.
One can only imagine that means kicking the legitimate claims of people who are down. At least that's what it looks like, reading between the lines.
We live in very mean times, and our insurance company, employer based health system makes them that much meaner.
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