Aetna Inc., the nation's largest health insurer, said Tuesday it will no longer offer its HMO product in certain counties in California as the company pares down membership to focus on profitability.
Ronald Williams, Aetna's newly named chief of health operations, told investors during the 22nd Annual Goldman Sachs Healthcare Conference that the company is reviewing markets, products and customer segments to determine which areas to exit.
"One of the most important new directions is a bias toward profitability," Williams said. "We are prepared to be smaller but more profitable." The company has been struggling to improve profit amid rising medical costs.
Regarding the California exit, Williams said, "We don't believe the medical cost structure we have for reimbursing [health-care] providers in those counties supports the profitability objective we have."
Aetna said late Tuesday that it has notified the California Department of Managed Health Care that it intends to withdraw its HMO-based products from 11 counties in the Central Valley, as well as from 12 ZIP Codes in Riverside and San Bernardino counties. The company said the move would affect about 44,000 of the 1.8 million Aetna members in California.
The withdrawal would become effective for group renewals on or after Jan. 1, 2002. Aetna said it would withdraw its commercial HMO, "QPOS" and "USAccess" products from Napa, Yolo, Placer, El Dorado, Sacramento, Merced, Madera, Fresno, Kings, Tuolumne and Tulare counties, and partially from Riverside and San Bernardino counties.
Shares of Aetna eased 2 cents to close at $25.79 on the New York Stock Exchange on Tuesday.