Hartford Business Journal

HARTFORDBUSINESS.COM | DECEMBER 9, 2024 21 5 WE WATCHED IN 2024 Integration challenges Kane arrived at Aetna last fall with a notable resume. The Harvard MBA graduate spent 17 years at Goldman, Sachs & Co., including time as a managing director in the investment banking division. More recently, he served as chief financial officer for Louisville, Kentucky-based Fortune 50 health insurer Humana. A history buff, Kane said he took time during his first few months on the job to learn about Hartford's history and Aetna's longtime role in it. For example, during a two-day retreat with his senior executive team at Aetna's headquarters, he brought in a historian from the Connecticut Museum of Culture and History, who showed off artifacts and discussed the city's and Aetna's past. Late last year, he also dined with former Aetna CEO Jack Rowe, who led the company from 2000 to 2006. But Kane came into the job as Aetna was already facing headwinds, including in its Medicare Advan- tage business, which is the private sector alternative to the federal government's insurance program for individuals who are 65 years of age and older. Aetna has become a major player in that market: Medicare made up more than 50% of the $105.5 billion in revenue generated by CVS' healthcare benefits business in 2023. Changes to quality and customer satisfaction rankings from the Centers for Medicare & Medicaid Services lowered some of Aetna's Medicare reimbursement rates in 2024. At the same time, higher post-pandemic utilization of medical services has driven up costs. Meantime, just as Kane started in his new role, CVS Health in August 2023 notified the state Department of Labor that it was laying off more than 500 Aetna employees as part of a broader cost-cutting effort. That enhanced concerns about Aetna's future in Hartford, where the company has been headquartered since 1853. Kane allayed some of those fears last December when he told HBJ: "There are no plans for Aetna to leave Hartford." CVS purchased Aetna in November 2018 in a deal valued at $69 billion, and pledged to keep the health insurer in the Capital City for at least 10 years. But Kane also acknowledged the companies were still in the "early innings" of integration, a process that was slowed by the pandemic. CVS has also been trying to integrate other recent acquisitions, including Oak Street Health, a national provider of primary care to Medicare patients purchased last year for $10.6 billion. Oak Street Health in 2024 opened its first Connecticut location within an existing CVS store in Waterbury, and has three other outposts planned in the state in New Haven, Bridgeport and New Britain. 'Proactively addressing' problems Now leading those integration efforts is Nelson, the new Aetna president, and Joyner, CVS' CEO, among others. During a Nov. 6 conference call with analysts, Joyner expressed optimism that Aetna will have a better year in 2025, adding that the executive team knows "what the problems are" and is "proactively addressing" them. Margins within Aetna's Medicare Advantage business are expected to improve next year, Joyner said, as the company shrinks its membership rolls by 5% to 10%, and benefits from improved federal quality ratings. "You've seen changes in how we've structured our leadership teams, seen changes in terms of how we structured our risk management and pricing controls, so we believe that we're on the path of actually getting to an improved performance," Joyner said. "And so, (the more) quickly we can move past 2024 and into 2025, I think the better we'll continue to be for the collective group." CVS' HEALTHCARE BENEFITS (AETNA) SEGMENT 1Q-3Q 2024 1Q-3Q 2023 CHANGE % CHANGE Total revenues $97.7B $78.9B $18.8B 23.8% Adjusted operating income $746M $4.9B -$4.2B -84.8% Medical benefit ratio* 91.7% 85.5% 6.2% 7.3% Medical membership 27.1 M 25.7M 1.4M 5.4% *Medical benefit ratio is calculated by dividing the healthcare benefits segment's healthcare costs by premium revenues. It represents the percentage of premium revenues spent on medical benefits for insured members. | Source: CVS Health 24_012074_Hartford_Business_Journal_DEC Mod: November 11, 2024 4:36 PM Print: 11/14/24 page 1 v2.5 ALWAYS IN STOCK IN 13 LOCATIONS LARGEST SELECTION OF RETAIL PACKAGING ORDER BY 6 PM FOR SAME DAY SHIPPING 1-800-295-5510 uline.com π

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