Aetna's New Contract - Analyst Blog

US health insurer Aetna Inc. (AET) announced that it has entered into a partnership with Long Island Health Network (“LIHN”). As per the terms of the agreement, LIHN will service all of Aetna's members at all 10 of its hospitals.

The contract, which will be effective on January 1, 2011, will enable Aetna to reduce the cost of delivering high-quality care to its members, at the same time expanding local access to affordable health insurance products.

Long Island Health Network is a group of 10 hospitals that came together in 1998 to better their clinical quality, enhance operational efficiency, and expand access to care for the 2.8 million residents of Nassau and Suffolk counties.

 

Earlier during the month, a similar contract with Saint Barnabas Health Care System (“SBHCS”) will enable Aetna members who receive care at any of the SBHCS hospitals and facilities to continue to be covered at the in-network level of benefits. This contract will also come into effect on January 1, 2011. The SBHCS is the largest not-for-profit integrated health care delivery system in New Jersey and one of the largest in the nation.

Last month, the Connecticut based health insurer also entered into an agreement with The Washington Hospital to its provider network in western Pennsylvania.

Aetna's total membership base consists of 18.53 million medical members, 13.8 million dental members and 9.53 million pharmacy members. It provides service to these members through a strong network of more than 5,200 hospitals that house 555,000 primary care doctors and specialists.

Earlier during the month Aetna reported third-quarter operating earnings of 84 cents per share, quite ahead of the Zacks Consensus Estimate of 67 cents aided by higher commercial underwriting margin due to lower utilization, partially offset by lower commercial insured membership.

After posting better-than-expected results for the first three quarters of 2010, Aetna is increasing its earnings expectations for the third time. The company now projects full-year 2010 operating earnings of $3.60 per share, up from the prior estimate range of $3.05−$3.15.

Aetna's peers CIGNA Corp. (CI) and UnitedHealth Group (UNH) also reported favorable earnings during the third quarter, mainly due to lower medical utilization.

 
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