In an interview last December, Brian Kane expressed optimism about the future of Aetna and the health insurer’s headquarters remaining in Hartford.A year later, Aetna is still based in the Capital City; Kane isn’t.In August, Kane was pushed out of his job as Aetna’s president, after less than a year in the role. His departure […]
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In an interview last December, Brian Kane expressed optimism about the future of Aetna and the health insurer’s headquarters remaining in Hartford.
A year later, Aetna is still based in the Capital City; Kane isn’t.
In August, Kane was pushed out of his job as Aetna’s president, after less than a year in the role. His departure was one of many notable events that have marked a tumultuous year for the health insurer’s parent company, CVS Health.
The Rhode Island-based provider of everything from health plans and prescription drugs to retail pharmacies and even primary care has dealt with numerous challenges in 2024, including higher-than-expected medical expenses from its insurance arm Aetna.
That has weighed down earnings and led to investor unrest. CVS’ stock price since the start of the year was down about 25% as of Dec. 4, and the company reported a 53.1% drop in profits (to $2.9 billion) through the first three quarters of 2024.
In response, the company’s top executives and board have made major changes in 2024 that will likely shape Aetna’s future.
- CVS in February cut its 2024 profit forecast due to higher-than-expected medical costs in Aetna’s Medicare Advantage business, which also is feeling pressure from federal policies that have squeezed reimbursement rates.
- Rising healthcare costs at Aetna sank CVS’ first-quarter earnings, forcing the company in May to cut its profit forecast for a second time.
- In its second-quarter earnings report on Aug. 7, CVS announced it was replacing Kane, and that CVS Health CEO Karen Lynch would oversee Aetna. The company also lowered its profit expectations for a third time.
- On Sept. 30, activist hedge fund Glenview Capital Management, which has a large stake in CVS, met with the company’s management to discuss ways to improve operations, according to the Wall Street Journal. The board announced a strategic review process that could include a possible breakup of CVS Health. The company also informed employees it will cut 1% of its workforce, or about 2,900 workers.
- In early October, CVS disclosed plans to lay off 416 employees tied to Hartford-based Aetna – mostly remote, out-of-state workers.
- On Oct. 18, CVS’ board announced that Lynch was being replaced as CEO by David Joyner, who most recently served as executive vice president of CVS Health and president of CVS Caremark, the company’s pharmacy services business.
- On Nov. 6, former UnitedHealthcare CEO Steve Nelson was named Aetna’s new president.
- On Nov. 18, Larry Robbins, CEO of Glenview Capital Management, was added to CVS’ board, along with three other new members.
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 Advantage 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.”
