AETNA: Looking to Expand in California
Despite its secure status as the nation's largest health insurer and its 15% growth rate in California, a rate that would make many other plans jealous, Aetna Inc. sees plenty of opportunity for more growth in the state. Noting that Aetna "only" ranks fifth in California, Western Region President Thomas Williams said, "We are very serious about growing in California. Nationally, California is one of the areas we are focusing on." Williams said Aetna's recent acquisition of Prudential HealthCare gives it penetration in seven new markets where Prudential was strong, especially in rural areas. The deal also "means we have one less competitor to deal with," said Williams. Sanford C. Bernstein analyst Kenneth Abramowitz said, "The California market is one of the toughest in the country. Both Aetna and Prudential are not so strong there, but at least they will be able to differentiate themselves better now. In a year, they should be a far stronger company, and stocks usually go up when companies are stronger." Williams said that Aetna plans to grow by marketing itself as a national plan that can serve "large, multistate customers," but that it will also emphasize the small business market. He said, "We've developed a sales force to sell to those clients, and we're doing well."
The California Medical Association, like its cousins around the country, suspects the merger will have negative consequences for health care. CMA attorney Astrid Meghirgian said, "We remain concerned. Aetna has increased its market share and they're bigger, and bigger isn't better in health care." Moreover, she said, the trend toward consolidation in the industry is "pretty dangerous for physicians and patients. If one HMO figures out a way to treat you unfairly, the others follow suit." But Williams said, "It's a very competitive business. There's no lack of competition" (Shuttleworth, Contra Costa-Tri Valley Business Times, 8/16 issue).