As a health insurer, Aetna is exposed to a lot of risk. It has managed its health risk well, but faces legislative risk because it could lose revenue if the government decides to cut Medicare programs.
Having been the only national healthcare provider in 2008 that did not have to lower forecasts, Aetna is faced with its first forecast lowering and fears of future reductions. Such forecasts come in light of pressured margins that had impacted Aetna's major competitors during the last fiscal year as well as rising medical costs for healthcare providers.
Aetna Inc lowers its profit forecast for 2009 as profit margins have been pressured by increasing medical costs. Analysts speculate that this may not be the last time that Aetna will have to lower its forecast. Stocks fell by approximately 5% with this announcement.
Aetna has yet to demonstrate that it holds member service as a high priority. It hides behind what it calls "industry standard" claims processing practices and fails to acknowledge member requests to deny potentially fraudulent claims until such time as appeals are submitted and the provider in question has been contacted. Additionally, it appears to employee a high number of risk ignorant, or simply arrogant, member service reps. Investing in a company such as this is like playing with fire, it's only a matter of time before you get burned.
As a health insurer, Aetna is exposed to a lot of risk. It has managed its health risk well, but faces legislative risk because it could lose revenue if the government decides to cut Medicare programs.
Aetna needs to grow. Its low penetration rates are worrisome, and its medical loss ratio is needlessly low. The company could improve profitability by raising its ratio but increasing enrollment even more.
