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Aetna Ready For 'Dual Eligibles' Despite Commercial Focus - CFO

03/19/2012 | 03:55pm US/Eastern
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   By Jon Kamp 
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Aetna Inc. (>> Aetna Inc.) believes it can ably serve health-challenged patients covered by both Medicare and Medicaid, even though the company doesn't have a major stake in those markets.

Additionally, the commercially-focused health insurer doesn't need acquisitions to win business for "dual eligible" patients, according to Chief Financial Officer Joseph Zubretsky. Some of Aetna's big competitors have recently made deals with an eye on dual patients, and Aetna has faced questions about whether it has the right make-up for the market.

"I do believe we'll have the platforms built to be able to respond to this opportunity," Zubretsky said, speaking during an interview at Aetna's Hartford headquarters.

The market has significant potential, but will build over several years, giving Aetna time to grow its businesses from within, Zubretsky said. Meantime, Aetna has the capabilities within these businesses to address the kind of complex health problems dual patients often present, he said.

Dual patients, who represent a potential $300 billion market for health insurers, have become a hot topic as states and the federal government look for ways to better coordinate care and save money. These patients tend to rack up high costs due to their health challenges. A handful of states could have programs for covering dual patients up and running next year, and the market is expected to continue growing in subsequent years.

Managed-care companies could be big beneficiaries, but questions abound about which firms are best positioned to win state-by-state contracts. Analysts view Medicaid-focused insurers such as Molina Healthcare Inc. (>> Molina Healthcare, Inc.) and Centene Corp. (>> Centene Corp) as potential winners, and bigger insurers such as UnitedHealth Group Inc. (>> UnitedHealth Group Inc.) and WellPoint Inc. (WLP) are also expected to compete based on their presence in both the Medicaid and Medicare markets.

Aetna has modest stakes in markets for government-based plans. At the end of last year, roughly 90% of Aetna's 18.5 million medical members were on commercial health plan, which are typically plans provided through employers.

Citigroup analyst Carl McDonald recently said Aetna's valuation has been hurt by "the company's lack of government exposure". Still, Aetna shares are up 33% over the last year, helped by patients keeping a lid on health costs after the recession.

Competitors including UnitedHealth, WellPoint and Cigna Inc. (CI) have all recently made Medicare-focused acquisitions that could improve their chances in the duals market. Aetna has been wary of paying too much, however, and feels there is time to build up its own businesses.

"The opportunity has been reflected in certain managed care valuations long before the revenue is ever going to show up," Zubretsky said. "This is not a cataclysmic event where $300 billion dollars is going to race into the market inside of 12 months. It's going to happen in a phased approach."

Aetna Chief Executive Mark Bertolini has talked about the company's ability to grow its Medicare business by keeping commercial members on Aetna plans when they switch over to Medicare. There are about 1.2 million Medicare-eligible members in the company's commercial membership. He also noted Aetna has more than doubled revenue in its Medicaid business since acquiring it in 2007.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

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