By Caroline Humer and Ankur Banerjee
(Reuters) - Health insurer Aetna Inc <AET.N> said on Tuesday it lost more money than expected on the Obamacare individual insurance plans, one of the main pillars of the Affordable Care Act that President Donald Trump is working to "repeal and replace."
Aetna Chief Executive Officer Mark Bertolini also predicted years of transition in that individual insurance business but said it presents opportunities as new products are developed that appeal to younger and healthier people.
Bertolini said the company is weighing how to proceed after a federal court ruled last week against its $34 billion deal for Humana Inc <HUM.N> on antitrust grounds. He said Aetna, the No. 3 U.S. health insurer, may decide to appeal or there could be a deal extension, which it will announce before the current Humana agreement's end date of Feb. 15.
Aetna, along with UnitedHealth Group Inc <UNH.N>, has largely exited the individual business for 2017, but has remained on exchanges in four states. It has 240,000 customers in individual plans and said it expects to post a loss again this year on the business.
Bertolini said in an interview that the Hartford, Connecticut, company will not enter any new markets with exchange Obamacare plans in 2018, and will decide in the next few months if it will re-enter Delaware, Iowa, Nebraska and Virginia, where it now sells these plans.
Like many insurers, he said Aetna feels structural changes are needed to account for the higher medical costs of participants in the Obamacare exchange market for individuals. He said the company is talking to lawmakers and regulators about how to make these changes as Trump and Republicans consider new legislation and rules.
Aetna said it lost $450 million on the Obamacare business in 2016, including $100 million more than expected during the fourth quarter. The company expects lower losses in 2017.
HUMANA STILL IN QUESTION
Aetna said it was still deciding how to proceed on Humana, but analysts said they thought it was unlikely a deal would go forward.
"Investors would want to know if they are extending the agreement or not. Or if they are appealing or not," Leerink Partners analyst Ana Gupte said. "In some ways I think investors don't want any appeal. They want an accelerated share repurchase and then to just move on."
The U.S. Justice Department filed a lawsuit in July to block Aetna's purchase of Humana and Anthem Inc's <ANTM.N> $54 billion deal to buy Cigna Corp <CI.N>, saying they would raise prices. There has been no ruling on Anthem's deal yet.
Earlier on Tuesday, Aetna said fourth-quarter net profit fell to $139 million, or 39 cents per share, from $321 million, or 91 cents per share, a year earlier. That included a $215 million expense for a voluntary early retirement program.
Excluding items, Aetna earned $1.63 per share, above the analysts' average estimate of $1.44, according to Thomson Reuters I/B/E/S.
Aetna's medical benefit ratio, the percent of premiums spent on claims, rose to 82.1 percent from 81.9 percent. The lower that ratio, the more the insurer profits. The ACA mandates the level be no lower than 80 percent.
Total revenue rose about 5 percent to $15.73 billion, but missed the analysts' average estimate of $15.86 billion.
The company said it expected 2017 operating earnings of at least $8.55 per share. Analysts' on average were estimating $8.79.
Aetna shares were up 0.5 percent at $117.25 on Tuesday afternoon.
(Reporting by Caroline Humer in New York and Ankur Banerjee in Bengaluru; Editing by Lisa Von Ahn and Matthew Lewis)