Aetna Earnings Call Insights: Pricing Environment and TRS Conversion
Aetna (NYSE:AET) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Matthew Borsch – Goldman Sachs: Mike, my first question just on the pricing environment and how your account base is reacting to the surcharges that you are starting to put through for Health Reform on the insured side that would include the industry fee. Is that starting to become a meaningful component as you head into July 1 renewals?
Mark T. Bertolini – Chairman, CEO and President: Matt, this is Mark. I think we are early in the cycle of putting these fees and insurance premium charges into our rates. So we only have a couple of months’ worth of 2014 into the rates now. So it’s fairly low noise, but I think the market is waking up to all the taxes associated with the Affordable Care Act, and we’re getting a lot of questions. And that leads to the strategy as we think about how we renew people into 2014 and do we give them more time to adjust into the marketplace relative to impacts like benefit plan changes that they will be required to make, impacts like guaranteed issue and the tighter rating requirements. So the market is waking up. People are asking a lot of questions. Too early to see the ultimate reaction, given that we only have a couple of months priced in.
Joshua Raskin – Barclays Capital: Just on the Medicare side, I guess sort of a two part. One, the TRS conversion, did that spur any additional interest? I’d be curious to see what your group pipeline looks like. And then assuming you guys did doesn’t sound like you are going to close Coventry today, do you think you will have enough time to work together before that first Monday of June to sort of work on a combined MA strategy in terms of bidding for 2014?
Mark T. Bertolini – Chairman, CEO and President: On the first point, the TRS conversion and the group pipeline is strong. And we – it’s way too early to tell, obviously the results on TRS, although we watch it on a daily basis as the activity moves forward, but that is part of the impact on our MBR for the first quarter of 2013. As it relates to how we think about Medicare going forward, let me have Shawn talk a little bit about – respond to the second part of your question.
Shawn M. Guertin – SVP, CFO and Chief Enterprise Risk Officer: So Josh, I think the one thing I’d say at the outset is our proposed acquisition of Coventry never contemplated that we had to see those bids before they went in. As you know, they have a pretty profitable product line there themselves. Having said that, in the event that we do have the opportunity sort of post-close to get in there and see what the bids look like and influence them, if need be, we will be ready to do that, and we have teams of people and a process all set up to do that if indeed we have that opportunity.
Mark T. Bertolini – Chairman, CEO and President: And Josh, we did have a cleanroom setup where we’ve had analysis already done in a format that we can react too quickly, so those teams will be able to react to that information the day we close it. If it happens before, we have to submit the rates.