Can managed care plans consistently increase membership without sacrificing profits — or conversely increase profits without sacrificing membership? The recent example of Aetna (solid membership growth followed by profit shortfalls) and others before suggests the answer is no, as noted by Oppenheimer analyst Carl McDonald.
While it was intellectually stimulating to consider why Aetna might be different from its managed care peers, and better able to manage through the more difficult fundamental environment, it turns out at the end of the day that Aetna was no more immune to the situation than either UnitedHealth or WellPoint. With Aetna’s operating earnings guidance now down almost 30% for the year, it seems safe to say that none of the larger plans in the group can really stake a claim to having any kind of sustainable competitive advantage over their peers. Aetna had the responsibility for awhile, but as it turns out, the ability to grow commercial risk enrollment profitability was just a façade that couldn’t be maintained for very long.
One of the things this reality suggests — despite claims of differentiation among leading plans — is the notion of health insurance as commodity. Healthcare reform featuring insurance exchanges offering plans with standard benefit packages would only make it more so.