Aetna Rising Medical Costs Drop Q2 Profits by 94%
The "country's largest insurer," Aetna Inc., yesterday reported a 94% drop in second quarter net income and attributed the "disappointing results" to increases in medical costs, the Wall Street Journal reports. Also, costs for the company's HMO line increased by about 18% compared to the second quarter last year, a rate "not seen since the late 1980s." Aetna said its members visited more specialists and had more prescriptions filled than the insurer had anticipated (Martinez, Wall Street Journal, 8/9). Overall, Aetna lost $95.9 million in Q2 2001, compared to a $36.4 million profit during Q2 2000. For each premium dollar, the insurer spends 91.3% on medical costs, as opposed to 86.8% last year (Herman, New York Daily News, 8/9). Second quarter revenue dropped 3% to $6.54 billion, and the insurer reported a net income of $10.6 million, down from $186.6 million in the second quarter last year (Wall Street Journal, 8/9). Since September, the insurer has undergone a "major restructuring" to identify and correct problems. CEO and Chair John Rowe, said, "We have found about 100 problems here, each of which is contributing about 1% of the total problem. We just didn't have the kind of discipline in respect to operations" (Reuters/Los Angeles Times, 8/9).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.