About the same time Abelson’s story hit the street reporting that insurers were moaning and groaning about increased medical costs, an analyst blog for Zacks Equity Research, a firm that makes stock recommendations, offered a different take. It told investors that Aetna was projecting the same increase in medical costs for the coming year for its commercial business as it had last year, 6.5 percent. (In insurance-speak, that’s called medical cost trend.) Even though it reported that Aetna does believe it will be challenged by higher medical costs and “weak commercial membership growth,” Zacks told blog readers that the carrier may do better and “surprise investors.” Among several reasons, its $7 billion investment in Coventry Health Care, which allows it to expand its Medicare Advantage and Medicaid business, would help the insurer weather the challenges.
In reporting its third quarter earnings results in October, Aetna’s chief financial officer reported that the company was “committed to deploy more than $7 billion of capital” for the proposed acquisition of Coventry Health Care and had delivered “solid financial performance” in 2012, including a six percent increase in revenues and strong cash flow generation. That hardly sounded like a company in bad shape.
Our suggestion: When insurers offer the superficial rationale that higher medical costs require higher premiums, and blame Obamacare, resist the temptation to be a stenographer. Get on the Internet and start looking at the company’s public statements, reports of investor calls, and meetings with stock analysts. Comb company news releases. Get an expert to help you understand rate filings if your state requires them. Connect the dots. This little post about Aetna shows what you can find.
The making of a meme
The Second Opinion, on the reporting of healthcare and health policy, is part of CJR’s United States Project. Follow @USProjectCJR for more posts from Trudy Lieberman and the rest of the United States Project team.