HMO To Drop 650,000 Customers To Raise Priofits

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Health insurance giant Aetna is planning to force up to 650,000 clients to drop their coverage next year as it seeks to raise additional revenue to meet profit expectations.

In a third-quarter earnings conference call in late October, officials at Aetna announced that in an effort to improve on a less-than-anticipated profit margin in 2009, they would be raising prices on their consumers in 2010. The insurance giant predicted that the company would subsequently lose between 300,000 and 350,000 members next year from its national account as well as another 300,000 from smaller group accounts.

"The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering," said chairman and CEO Ron Williams. "We view 2010 as a repositioning year, a year that does not fully reflect the earnings potential of our business. Our pricing actions should have a noticeable effect beginning in the first quarter of 2010, with additional financial impact realized during the remaining three quarters of the year."

Aetna's decision to downsize the number of clients in favor of higher premiums is, as one industry analyst told American Medical News, a "pretty candid" admission. It also reflects the major concerns offered by health care reform proponents and supporters of a public option for insurance coverage, who insist that the private health insurance industry is too consumed with the bottom line. A government-run plan would operate solely off its members' premiums.

Aetna actually made a profit in 2009 but not at levels that it anticipated.

"They were surprised by an acceleration in medical costs in 2009 which pressured their earnings," Josh Raskin, an industry analyst for Barclays Capital, told the Huffington Post. "In an effort to get back to a more profitable level, they are raising their prices to match cost trends. When you raise rates, you run the risk of losing your membership. Health insurance is a very competitive marketplace."

As Williams told investors on the call: "The pricing that we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering."

Aetna is one of the largest insurers in the private market, covering roughly 17.7 million people according to its 2008 annual report. It is also a major player in the current health care debate and inside Washington D.C. The insurance company has spent more than $2 million on lobbying just in 2009, according to the Center for Responsive Politics.

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The problem?
Posted by awisdom01 on 2009-12-08 10:50:39
The current problem with health insurance IS health insurance! The whole point for any insurance company is to make money. The way an insurance company makes money is by paying out LESS than they take in. Shareholders would put everything they own into an insurance company that didn't ever pay a claim. Their profit would go through the roof! But would anybody want to sign up for health insurance with that firm?

The insurance companies have the public in a stranglehold, and that is the bottom-line reason, pure and simple, why health care reform is being bashed about. True reform would demand an end to current insurance practices by forcing competition between the different carriers. And the insurance companies do not want competition. It will spoil their profit margin. Do you really think they give a damn about the people they insure?
 

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