Aetna Inc. (NYSE:AET) Q4 2014 Earnings Conference Call - Final Transcript

Feb 03, 2015 • 08:00 am ET

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Aetna Inc. (NYSE:AET) Q4 2014 Earnings Conference Call - Final Transcript

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Q & A
Executive
Shawn Guertin

was strong enough that we can overcome that. This really is a question about sort of certainty at this point and make no mistake we believe the loss certainly says we are out the money. We believe it's an important part of the early stages of this program. But some of the activity around the budget process and some of the guidance that came out frankly created a degree of uncertainty about the collectibility and we just didn't feel like we were over the threshold to do that.

In addition, I mean the risk -- on this whole topic, it is really important for everyone to realize what I would call the relative immaturity of the data that pertains to both the base estimates of claim experience, which is still emerging in this new program, but also the data we are using to estimate risk adjustors is, as you know, from an outside consulting source of gathering industry data. It is certainly not the official data set upon which we will ultimately make that calculation. And so, there still is a lot of uncertainty. So I think when you put all those things together, it led to our decision.

Analyst
Peter Costa

This is a follow-up. So do you expect to adjust those sometime in the first quarter or not till really the second quarter when you get the final numbers from the government?

Executive
Shawn Guertin

It will depend on what comes out of this emerging dataset. So I would say conceptually, we would directionally adjust those numbers as the data matures. But to your point, the real sort of final adjustment and the real meaningful adjustments I think will be in the middle to second half of next year when we actually get quote the real data.

Operator
operator

Ana Gupte, Leerink.

Analyst
Ana Gupte

On the commercial cost trends of 6%, 7%, you had a huge increase baked in because of hepatitis C and then just overall from pharmacy. Now that you have negotiated this contract with Gilead, do you feel there is any upside or is that contributed to even higher going forward in 2015?

Executive
Shawn Guertin

Part of one of the reasons that we increased our overall guidance outlook for 2015 is I do think that our final negotiations on this topic are creating upside. And I think sort of within the range it clearly will be a positive for us. We've held the overall range at this point. It is still early, but directionally it certainly would -- is a positive factor for us, both from an earnings standpoint and a medical cost trend standpoint.

Analyst
Ana Gupte

And then, Shawn, you talked about the 49.2 on trends, it's not only four days higher than last year, but that is historical high from the recent perspective? Any reason to keep it that high into '16 now that the raw materials have been implemented, do you have much better understanding of exchanges you saw?

Executive
Shawn Guertin

A couple things. I would like to continue to think on exchanges that we have tried to