Health insurer Aetna Inc. said Wednesday its second-quarter net income rose 9 percent in part because it benefited from a continued slowdown in the use of health care services by its members. The company also raised its full-year earnings forecast.
Health care utilization has grown at a slower clip than insurers and industry watchers have expected for the past several quarters, and that has helped managed care companies turn in strong performances. Analysts mainly cite the economy as a possible reason for the trend. They say consumers tend to scale back their use of care after a recession by putting off elective procedures or skipping doctor visits.
Many analysts expect this trend to continue at least into next year, but insurers expect utilization rates to pick up later this year.
"We just think it's so unusually low that it has to revert to the mean at some point," Chief Financial Officer Joe Zubretsky said.
Health care costs, which are Aetna's largest expense and amount mostly to medical claims paid, fell 5 percent to $5.37 billion in the second quarter.
Overall, Aetna earned $536.7 million, or $1.39 per share, in the three months ended June 30. That's up from $491 million, or $1.14 per share, in the same period last year. Adjusted earnings were $1.35 per share.
Total revenue slipped 2 percent to $8.34 billion, as the Hartford, Conn., company's commercial health insurance enrollment fell compared to last year's second quarter.
The performance topped Wall Street expectations. Analysts surveyed by FactSet expected, on average, earnings of $1.07 per share on $8.25 billion in revenue.
Aetna is the third-largest commercial health insurer based on both enrollment and revenue, trailing WellPoint and UnitedHealth. Health insurance is Aetna's main product, but the company also sells dental, group life and disability coverage.
Aside from the health care use trend, disciplined pricing and medical cost management also helped Aetna in the second quarter, Chairman and CEO Mark T. Bertolini said in a statement from the company.
Total medical membership fell 2 percent to 18.2 million members compared to the same quarter last year due to a drop in enrollment for commercial plans, which include employer-sponsored group coverage and policies purchased in the individual market. But membership grew compared to this year's first quarter, as Aetna added 523,000 people through its acquisition of Prodigy Health Group.
Aetna said last month that it completed the $600 million purchase of privately-held Prodigy, which administers self-funded health plans for big companies.
Aetna now expects 2011 adjusted earnings of $4.60 to $4.70 per share.
This is the second time this year that the company has raised its guidance. In April, Aetna said that it expected 2011 adjusted earnings to range between $4.20 and $4.30 per share, which was a big jump from its previous guidance for earnings of between $3.70 and $3.80 per share.
Analysts predict earnings of $4.38 per share for the year.
Aetna's stock fell 60 cents to $42.02 in Wednesday afternoon trading while the Standard & Poor's 500 index was down more than 1 percent.
Chapman reported from New York.