Aetna (AET) derives 58% of its operating revenues from its commercial business, which involves offerings such as fully insured health plans and self-insured health plans.
The above graph shows Aetna’s commercial enrollment breakdown, with self-insured enrollments amounting for more than half of commercial enrollments followed by fully insured and CDHP enrollments. Aetna offers insurance services to large and small employers and individuals.
The health insurance industry (XLV) is witnessing a gradual shift from fully insured to self-insured forms of insurance. In the fully insured market, the employer contracts with an insurance company to assume responsibility for all of the enrollee’s claims. In the self-insured market, however, the employer assumes the risk for claims while the health insurer provides administrative support in exchange for service fees. Fully insured employer-sponsored coverage has been on a decline as large employers with healthy employee populations and low medical service utilization are increasingly buying self-insured plans.
A CDHP, a subcategory of commercial enrollment, is a high deductible health plan combined with a financial savings account called a HSA (Health Savings Account). Contributions and withdrawals from the HSA account are not subject to federal taxes, making the product attractive for members.
A high deductible plan also requires members to use medical services prudently. Members have to pay the expenses themselves as long as the cumulative medical bill in the calendar year doesn’t exceed the deductible amount, making these plans attractive for self-insured employers. To find out more about deductibles, please refer to Making sense of health insurance companies’ payment options.
Pricing and distribution
Health insurance companies such as Aetna, Anthem (ANTM), Cigna (CI), and Humana (HUM) sell health insurance products through their sales personnel, independent brokers, agents, and consultants. For commercial fully insured plans, pricing, and other terms of the contract are generally established in advance of the policy period and have a duration of one year. For self-insured plans, fees are also fixed for one year.