Health insurers’ growth helps fuel increase in profit

Michelle Swafford

Friday, July 30, 2004 | 10:47 a.m.

Two major health insurers that do business in Nevada announced Thursday that their profitability increased in the second quarter from higher premiums and membership growth. Both insurers say Nevada will continue to be an important market for their portfolios.

PacifiCare Health Systems Inc. reported a 4 percent rise in its profit for the second quarter, beating analysts' estimates by 2 cents per share, while Hartford, Conn.-based Aetna Inc. reported a 106 percent increase in its profit for the second quarter after settling a class-action lawsuit in the year-ago quarter. Aetna's results beat analysts' estimates by 13 cents per share.

PacifiCare, based in Cypress, Calif., reported its net income rose to $76 million, or 80 cents per share, for the second quarter, compared with $73 million, or 96 cents per share, in the year-ago quarter. The second quarter 2004 results include a 21-cent reduction in per share earnings because of a 2-for-1 stock split in January and the issuance of 20 million additional shares.

Analysts polled by Thomson Financial Network had expected PacifiCare to earn an average of 78 cents per share.

The company's revenue increased 12 percent to $3.05 billion for the second quarter because the company was able to price premiums ahead of health care costs and increased the number of commercial members.

The company increased its premiums by an average of 11.7 percent after benefit changes and negotiations, while costs increased between 9.5 percent and 10.5 percent during the second quarter.

The number of people PacifiCare insures increased about 5 percent to 2.3 million people in the commercial market, marking the fourth consecutive quarter of growth, PacifiCare Chief Executive Howard Phanstiel said.

In the Las Vegas Valley, PacifiCare increased the number of people it insured by 9 percent to 36,000 people.

"It makes us on track to hit a 20 percent increase (in membership) in 2004," said Mike Clark, vice president of commercial sales in Arizona and Nevada.

PacifiCare on Aug. 1 will begin insuring North Vista Hospital's approximately 600 employees and is negotiating with a couple of unions to provide benefits, Clark said.

He said PacifiCare has increased the number of people it insures that are part of small group health plans by 15 percent.

PacifiCare plans to increase its focus on insuring individuals in Las Vegas and across the country, Clark said.

The Las Vegas Valley will be one of four metropolitan areas where PacifiCare will launch self-directed individual health plans in October, he said.

PacifiCare's Medicare + Choice program, Secure Horizons, posted a slight increase in the number of people it insures. Secure Horizons offers more benefits than traditional Medicare plans and increased by 600 people to 689,600.

Locally, the number of people insured with Secure Horizons remained constant at 25,200 people in the second quarter compared with the year-ago quarter, PacifiCare spokesman Tyler Mason said

PacifiCare said seniors on traditional Medicare are trying to figure out their new benefits with the prescription drug discount cards before they consider switching to a Medicare + Choice plan.

"We are experiencing some confusion and noise in the marketplace around all the changes," Mason said. "Summertime in Las Vegas and Nevada are slower because of the weather. People don't make decisions until fall."

Separately, Aetna's net income for the second quarter increased to $286.3 million, or $1.79 per share, from $138.4 million, or 87 cents per share, in the year-ago quarter. The 2003 second-quarter results include a $75 million settlement of a physicians' class action lawsuit.

Aetna reported revenue rose 9.2 percent to $4.9 billion in the second quarter on an increase in premiums and members from $4.5 billion in the year-ago quarter.

Analysts surveyed by Thomson Financial had expected Aetna to earn an average of $1.66 per share.

The number of people Aetna insures increased 3 percent to 13.4 million people in the second quarter.

In Nevada, Aetna insures 64,700 people.

Aetna increased its full-year earnings guidance to between $6.75 and $6.85 per share from a range of $6.60 to $6.75 per share.