Aetna Builds Empire: One Denial at A Time

By Donna Smith, August 22, 2012

It’s a business.  It’s big business, and it’s all about the money.  When plans for Aetna to purchase Coventry Health for $5.7 billion surfaced this week, all I could think about is where people like me –  Aetna’s insured – figure in the business models.  I’m not a patient in their calculations; I’m a medical loss.  And it just happens to be a deadly serious business.

So, in all the gobbledygook of business economics, the articles announcing the big Aetna buys Coventry deal, and foreshadowing of  the impact on Aetna’s bottom line, no one writes about the forbidden topic – what about the patients?  What will Aetna do to make sure that other costs – like medical loss ratios – are kept in check while still abiding by federal regulations under the Patient Protection and Affordable Care Act (PPACA)? 

How will the company keep its profits soaring and lower a leverage rate that this article says will rise in the wake of the Coventry Health deal?

From the article:  “Aetna Inc. (AET)’s $5.7 billion purchase of Coventry Health Care Inc. (CVH) will take the insurer from about the bottom to the top of leverage among its peers as it seeks to cut $400 million of costs…

“…Chief Executive Officer Mark Bertolini has pledged to trim leverage, the purchase’s profitability depends on cuts to management and technology spending that may be difficult to achieve, according to CreditSights Inc. The three major credit- ratings firms lowered their outlooks for the Hartford, Connecticut-based insurer after it announced the deal Aug. 20 and said it would take on $2.5 billion of debt to finance it.”

Already, Aetna and other major insurers have been creative in finding ways to classify wellness programs – like the Aetna Connections program – as part of the medical loss expense.  Disease management programs as well as some nurse hotlines provided by insurers were quickly reclassified as medical expenses following the ACA’s imposition of medical loss ratio requirements.  Those reclassifications often mean the actual healthcare claims – for medications, services and treatment provided by physicians and other healthcare providers – may be denied more frequently.  If the money can be kept “in house” by staffing an insurance company run disease management program or nurses hotline, fewer checks need to be sent outside the company.  Profits are protected, and profits are enhanced.

Aetna’s willingness to leverage and to “risk” so much in order to close the Coventry deal tells us much about the profits they expect to gain from it:  “In all, Coventry will add more than 5 million customers to the 26.7 million already on medical and prescription drug plans with Aetna, according to the companies’ quarterly reports.”  And the company is especially interested in gaining the Medicaid and Medicare (government paid programs) business.  Again, that’s cold, hard cash from outside the company.

So, in the short term, how does Aetna shore up the bottom line for investors?  How about denying some claims for medications?  Over the past three months, all three of the new medications my doctors ordered to help me with serious medical issues were initially denied.  One denial was overturned last week on appeal, but two still remain outstanding.  That’s a saving to Aetna of about $400 each month. And how does Aetna plan to cover the $2.5 billion in new debt they’ll take out to close the new business deal?  As one dear friend of mine said to me recently, “One denial at a time.”  It all adds up.

Hmmm, let’s do that math.  Aetna could deny just $400 for just a quarter of its 26.7 million current “customers,”  sign them up for $400 worth of disease management program support, and end up  paying off that debt in no time at all as they’d retain far more of their premium dollars in house rather than paying those dollars out.  $400 in profit times 6.5 million patients denied adds up to pay off that $2.5 billion debt.  

In the books it would look like they were fully compliant with the medical loss ratios required in the ACA.  But in the lives of patients, the pain and suffering could tell a much different story.  I know it does in mine.  That $400 denial causes me not just gut pain but consequences in my life that are far reaching beyond what needs to be listed here.

If you think your for-profit insurance company is very different from mine, think again.  But it’s sure deceptive, isn’t it, when just a few people have to be really hurt to allow for such massive profits.  It’s a business, folks.  And until we finally decide a Medicare for all for life system would better serve us all, the deceptions will grow ever more complex and deadly.