AET
#<UNK>, the market remains rational from a pricing standpoint.
We don't see any unusual behavior.
More so this year than in other years.
So we see this as a rational environment, but <UNK> can give you some insights into how do we see the small group market evolving.
So <UNK>, I think I just want to remind you that the small group market has been very dynamic if you think about what's happened with history.
We've had the keep what you have dynamics.
We had the change in the 51 to 100.
So it's been a very dynamic marketplace.
We will continue to favor margin over membership in the small group market.
As I said in the third quarter, we expect to see continued decline in volume pressure in our small group business throughout 2016.
But as <UNK> said, the market is rational.
We see competitive pricing across the board and we will continue to drive margin over membership, as I've said before.
Yes.
I think your conclusion is correct in that certainly the individual performance was better than we had originally established.
We can follow up offline on some of the specifics, but certainly reinsurance was one thing that looked a little bit worse in terms of the rate at which we accrued.
I mentioned earlier that risk adjustment was modestly better actually in terms of what we thought was going to happen there and again the important thing here is the underlying claim cost performance that also looked to be a little bit better.
So net net that is a correct conclusion that it turned out to be a bit better than we thought coming into the fourth quarter.
It's really about the aggregate level of claims.
There's an awful lot of moving parts in this business.
So inevitably many of the elements you mentioned sort of play into the analysis.
But it really is sort of about the underlying claim costs that we're seeing supporting this business.
We're not giving out the names of states.
Although some of them are important states for us to get, none of them have been contentious.
All of them ---+ all the hearings we have had have been very straight forward, supportive for the most part.
We continue to see more approvals coming and it's an extended process state-by-state.
Some of these approvals are contingent upon Department of Justice approval, which is the norm for this.
The DOJ conversations are not even yet started on the divestiture front.
We're still sharing data and working on the framework of discussions and so that still is yet to come, but we anticipate that that won't be too far into the future here and we still look at the second half of 2016 as an appropriate time to get it closed.
That is actually standard in every deal we've done where the Attorneys Generals need to look at this information.
They join in with the Department of Justice to get access to the same information.
We actually negotiate the confidentiality agreements and get those signed, so it's all part of standard course for these kinds of transactions.
So I would say about 40% of that membership loss is Assurant and the way to think about that is we provided network rental fees, very low PMPMs, high margins, but overall manageable results and not material generally.
We've started ---+ I will save the bond market piece for last.
We can have maybe <UNK> comment on that.
But (inaudible), which is actually I think good news so far.
The yields keep falling.
But I think relative to the transaction, we continue ---+ we have a joint integration operating committee that meets to the degree we can meet.
We've started to work on culture between the organizations because culture trumps strategy and we want to make sure we bring these organizations together effectively.
It's a best-of-breed strategy.
We continue to pour over all the potential accretion opportunities in both organizations as we get to know more within the limits of what we're allowed to look at.
And I can say that we do have internal targets, which always are a little more aggressive than what we share with all of you, which is the appropriate way to manage these kinds of things so that we make sure that we deliver.
<UNK>, in terms of the deal financing, it's far too early, especially in this market, to declare victory there.
But certainly what's happened heretofore I think we still feel good about our financing assumptions.
It is both a rate and spread dynamic and those have obviously held so far in terms of what we have assumed.
So we still have some time to go here and as we've seen, these things can move around a little bit, but we still feel good about the assumptions that we gave you.
I think, Matt, that all depends on how the market reacts in each segment.
So as we look at the HIF relief, it's not really all relief.
There is a lot of work behind that.
For example, in the Medicaid relationships we have, those are separately negotiated.
So there obviously would be a conversation there with our employer clients already asking about how does that affect pricing, how do they want to handle pricing and with Medicare it's how they set rates.
So we view this as not a windfall by any way, shape or form, but something that's going to be delicate to manage because, unless it's extended, which we highly doubt, this is going to be a difficult transition going in and out.
As you know, we've spent a lot of time getting the fees into rates, so having them come out and go back in would be difficult.
So I would say more to come.
We have a team working on this.
We've had a couple reviews already of the potential strategies we could pursue, but we're not quite ready to declare victory or defeat on either side of this yet.
Our plan is that Louisville will be the headquarters for our government business, which will include Medicare, Medicaid and TRICARE.
And so that is the commitment we made in the merger agreement.
That is the commitment I just made in front of the Greater Louisville, Inc.
Chamber of Commerce last Monday evening, or last Tuesday evening in Louisville and something that's ---+ it's actually the only community where we've made a real estate commitment as it relates to putting these deals together.
I realize all the leadership decisions, operating model, management processes are still to be defined.
They are still a competitor and so we don't have the kind of visibility or command of that organization to make those decisions.
I do know that within the context of the deal, there are stay bonuses in place for people that are key to the ongoing operations of the business and we approved those as part of the merger agreement going forward.
And Bruce and I are in constant conversation about this and making sure that we're keeping the people we need to keep.
I think for now it's stuff that we have done.
We are providing detailed information and data to CMS based on what we've experienced as our data set.
As you know, the operational accounting for the HICS is not quite up and running yet, so they are running a bit blind as it comes to data and so we're sharing our data with them, giving them insights.
It's part of what's gone into the feedback around special enrollment period, the 3Rs and a host of other issues that we think are important to get addressed to stabilize this program going forward.
The changes made to date are necessary, but not sufficient and we need to do more over time to make this program stable and supportive.
There are two ways this program can go.
They can be a Medicaid Plus kind of program with a high risk pool on a national basis versus a local basis to try and support a population of folks that are below 400% of the federal poverty level, or we can shape the program to get a wider risk pool and a more stable risk pool that encourages healthier risk to come in and allows us to have a broader range of population in the program.
That's yet to be decided and will be based on the kind of changes we make going forward.
Well, I think the place to start is a number of years ago, probably three years ago when we had a big rate reset, we had a conversation with the administration, with CMS that said, listen, we want to get to 100% of Medicare fee for service as an appropriate rate structure, but we want to do that over time so that responsibly we do not adversely impact the Medicare beneficiaries.
And that has been our goal all along and we continue to work toward that.
And I think the last couple of years have demonstrated a better partnership in coming to conclusion around that.
Part of the noise that you will see in this is you had the earlier release from the actuaries, which is just one input.
Then you will have the February notice, which will be another set of what I would call the smorgasbord of issues that we want to talk about as we come forward with an ultimate solution that will make itself readily apparent in April.
I think the industry, both through AHIP and Better Medicare Alliance, has focused on making sure that all the issues are understood, that everybody is sensitized to the impact on the beneficiary ultimately and that we come to a conclusion that allows the program to continue to grow because we believe that Medicare Advantage in the long run at the right rate structure is the appropriate solution for solving some of our entitlement programs, particularly around the Medicare population.
Well, the risk adjusters in and of themselves are a set of numbers that you have to manage against, which means you have to find the information, you have to work on actually improving the quality of care so that makes the risk adjusters work.
And so part of what we're going to see as we go forward is that the Medicare fee for service 100% number is going to continue to drift down as the industry does a better and better job of taking people with chronic comorbidities and managing them more effectively by improving the quality of care.
And it's through that change over time that you'll see sort of two glide paths drifting down, the industry's rate structure drifting down on top of that 100% of Medicare fee for service.
Risk adjusters is just one part of that and those risk adjusters will change as we improve the quality of care and the underlying health of the Medicare population.
I guess that's up to you.
Of course we have a horse in the race and of course, we perform and we always want to deliver and then our belief is it's a very solid performance, 15% year-over-year.
Yes, don't over complicate it.
15% EPS growth in a year where we were really limited on share repurchase, we had a very good year.
Well, it's certainly an issue that we have watched carefully during the quarter.
We have not really seen any meaningful disruption as a result of ICD-10, and I suppose that is one of the silver linings of having a long time to get ready for this as a broader industry.
But it is something that we're definitely paying attention to carefully throughout the quarter and frankly even into the beginning of this year as well.
What we're doing, <UNK>, is we're running parallel views to see whether or not there's any gaming going on between ICD-9 and ICD-10 and so far, we don't see that.
And between the CPT-4s because we were worried about that.
But we worked with a number of hospital systems and provider partners to do this check to make sure that there wasn't anything adverse coming out of it and so far, so good.
I think first on private exchanges, we're seeing the slowdown we anticipated as a result of employers who have tried it, but didn't see the rate stability that they wanted to see and have pulled back, particularly on the fully insured segments and moved back to ASO.
And so that's a sign that there need to be better proof points.
And we are launching our own private exchange version, proprietary private exchange version, in a number of markets.
Small group this year we started already and we have some clients for 2016, or actually 2015, I'm sorry, and in 2016, we have some clients that will be trying out our product and will be launching a Medicare version of private exchange as well for 2017.
So we see a lot of importance in connecting the underlying network and cost structure of healthcare to the private exchange in order to provide the stability that employers need and retail customers need in order to buy from us through that kind of model.
And so that has not been proven yet and so you're seeing it slow down to a degree until people start to put proof points out there that work.
So I think that is something that we need to be keeping our eye on.
Now if you look back at our guidance on the $10, there was not a lot of reliance on private exchange growth for that to happen.
We see the government sector as a key driver of that growth opportunity, as we continue to grow individual Medicare Advantage, continue to grow group, interestingly enough year-over-year.
And as we watch PDP, last year profitable; this year growth in what we believe to be an appropriately priced segment.
So we see the government sector as a driver of that going forward and we believe that if we get the HIX right that that will be a contributor going forward as well.
Well, I think it's inning number one because just talking about outcomes is an amorphous conversation.
The conversation with pharma that we're having needs to be much more specific.
It needs to be what are you going to do to make sure that the drug you are supplying not only has the right outcome, but gets the right level of compliance by the end user in order to control the quality of care that that end user gets.
And my argument has been with these ---+ with pharma has been it shouldn't be about the number of pills you sell.
It should be about whether or not the people that are getting the pills are the right people, getting full compliance, getting an overall medical cost impact that in the end analysis in sharing that risk with us you get a better margin than just selling more pills.
It helps them change their distribution model.
It allows us to go directly to the patient into the home where we believe we can get the ultimate improvement in quality of care and compliance.
Consistent with our discussion before about that our outlook is really premised on the actions that we've taken and we've controlled, I think I would have to answer the question, no, that they have not been sufficient to change our outlook.
That is not to diminish that directionally.
They are clearly the right things to do, but there is just a number of administrative and I think enforcement aspects around the special enrollment period that we would like to see get built out and implemented over time.
A transcript of the prepared portion of this call will be posted shortly on the investor information section of Aetna.com where you can also find a copy of our updated guidance summary containing details of our guidance metrics, including those that were unchanged or not discussed on this call.
If you have any questions about matters discussed this morning, please feel free to call me or Joe Krocheski in the investor relations office.
Thank you for joining us this morning.
