AET Aetna Inc. (delisted)

Aetna Inc. (AET) has recently revealed that it has finally got green signal from the Centers for Medicare & Medicaid Services (CMS), to market its Medicare Advantage and Prescription Drug Plan products. In April 2010, the company was banned from offering these products to new members as some of the Medicare prescription drug plans offered between 2009 and 2010 had failed to comply with the regulatory requirements.

Aetna’s Medicare products are regulated by the CMS. In April last year, the CMS had granted the company a limited waiver of these sanctions to allow it to continue enrolling eligible members into existing, contracted group Aetna Medicare Advantage Plans and Standalone PDPs through March 31, 2011. Consequently, the company’s 2011 Medicare membership was adversely affected because it did not participate in the 2010 open enrollment for individual 2011 Medicare plans, which occurred between November 15, 2010 and December 31, 2010

Through annual contracts with the Centers for Medicare & Medicaid Services (CMS), Aetna offers Health Maintenance Organization (HMO), Preferred Provider Organization (PPO) and Private Fee for Service (PFFS) plans for eligible individuals in certain geographic areas through the Medicare Advantage program. Members of this program typically receive enhanced benefits over standard Medicare fee-for-service coverage, including reduced cost sharing for preventive care, vision and other services. Aetna offered network-based HMO and/or PPO plans in 237 counties in 22 states and Washington, D.C. in 2010. It plans to further expand to 374 counties in 33 states and Washington, D.C. in 2011. 

Aetna also stated that it intends to immediately start marketing its Medicare Advantage and Prescription Drug Plan products so that it can begin enrolling beneficiaries beginning July 1, 2011. Medicare continues to be a key focus of growth for the company. However, the growth is likely to be slow as regaining of 44000 Medicare Advantage lives, which the company lost following the sanction, would be difficult.

Aetna competes with other health insurers such as CIGNA Corp. (CI), WellPoint Inc. (WLP), UnitedHealth Group Inc. (UNH). The stock of Aetna carries a Zacks Rank # 2, which translates into a Buy recommendation over the short term (1-3 months). However, over the longer term, we rate the shares Neutral.

 
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