Thursday, December 03, 2009
Insurance company Aetna thinks it’s better off by scaring away customers. Company officials plan to hike premiums next year to reverse the downward trend of Aetna’s profit margin, which fell from 11.1% in 2007 to 6.9% in the third quarter of 2009. Chairman and CEO Ron Williams said the price increase will probably cost the company between 600,000 and 650,000 customers.
Aetna successfully downsized its customer base earlier this decade, when it went from 21 million members to 13 million—a move that resulted in a higher profit margin of 7%, up from 4%.
David Gibbs, a retired health insurance industry consultant who has advised Aetna in the past, said the premium hike alone may not get the company the profit margin it’s seeking. Such moves tend to force healthier people out, leaving the sicker and more “desperate” still around. Gibbs suggested slashing certain benefits, like cutting back on prescription drug coverage, if Aetna really wants to improve its bottom line.
“There’s a rule of thumb out there that 20% to 25% of the people account for 75% to 80% of health care costs,” he told American Medical News. “Avoiding that segment is probably the quickest route to making a lot of money.”
-Noel Brinkerhoff
Aetna Prepares for Loss of 600,000 Members as It Raises 2010 Prices (by Emily Berry, American Medical News)
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