CMS clears the way for Aetna to pursue Medicare market

With government sanctions lifted, Aetna is free to sell its Medicare Advantage plans to seniors. And now it expects to have another line of coverage to sell, with the purchase of Medicare supplement business from Genworth Financial.

Aetna announced June 13 that it would pay $290 million in cash for the business, which includes 145,000 members.

The next day, the Centers for Medicare & Medicaid Services lifted restrictions on Aetna that were instituted in April 2010. The company was barred from selling its Medicare products to new members because it violated the agency's rules governing sales tactics, CMS said.

When it instituted the sanctions, CMS found that Aetna was incorrectly administering its Medicare Part D formulary and that its compliance programs and procedures for handling appeals and grievances were deficient. The company said it took the matter seriously and vowed to make the changes CMS demanded.

Coverage for Aetna's existing 1 million Medicare Advantage members was unaffected.

As of June 14, Aetna can enroll new members, but CMS had enough continuing concerns to hold off on auto-assigning low-income beneficiaries to Aetna.

Aetna's leadership has made it clear that its Medicare business is a key growth area. "The size of the Medicare market is too big to let it go away," Mark Bertolini, Aetna's CEO, president and chair, said at an investor conference June 8.

He also said that Medicare supplement coverage isn't necessarily a good deal for seniors, compared with a Medicare Advantage plan.

"The value proposition for a senior now is compelling to go into Medicare Advantage versus buying ... regular Medicare, buying your supplemental coverage and your Part D coverage separately. It's almost a $150 difference a month," Bertolini said five days before the Genworth acquisition was announced.

Aetna spokesman Alfred Laberge said the company didn't see Bertolini's statement as conflicting with its purchase of Medicare supplement business.

"Aetna believes there is a very compelling value proposition with Medicare Advantage plans," he said in a prepared statement. "We also recognize that many seniors prefer the traditional Medicare fee-for-service option with the flexibility of adding a Medicare supplement plan to cover certain expenses. With this acquisition, Aetna will broaden its Medicare product offerings to meet the needs of both groups of seniors."