Aetna CEO Set to Reap About $500M If CVS Deal Closes • Hacker News Board

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#111

Post by itamarst » Tue, Dec 05, 2017, 7:15 PM UTC

aaavl2821 wrote: post #109

prklmn wrote: post #104

Earlier quoted context omitted.

> so these gains did not come from profits, rather appreciation in the equity of the company during his tenure. it would be hypocritical to praise startup founders from reaping capital gains while admonishing this ceo Why do you think the equity went up in value? It’s because of profit driven - valuations and profitability usually go hand in hand. The difference between Aetna and most startups is the business of Aetn…

i disagree. point by point: * from 2014-2016, aetna's revenue has increased by 9%, its net income by 10%, and its stock price by 82%. i didnt check all the way back to the beginning of the current ceo's tenure, but id imagine it is a similar trend. stock prices and profitability are not as well correlated as wed like to think * why do you say aetna adds no economic value to society? i understand if you have a high de…

Health care is valuable. Health insurance is mostly a scam in the US, a way for insurance companies to take a cut without adding any value.

Talk to someone who has lived in countries with socialized medicine (as I have): other countries systems' aren't perfect, but they deliver better results, with less money, and without insurance companies taking massive profits for doing nothing but denying claims.

Full disclosure: health insurance company once repeatedly refused to pay $5000 bill to lab. When I finally said "I'd like to file a grievance" they magically discovered a "coding error" and the bill was paid.

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#112

Post by yequalsx » Tue, Dec 05, 2017, 7:17 PM UTC

rukittenme wrote: post #110

yequalsx wrote: post #106

Earlier quoted context omitted.

This is from be ACA but I think it gives the general idea of the tactics insurance companies use: https://health.usnews.com/health-news/articles/2008/08/25/ho... Here's one from after ACA passed and was implemented: https://www.cbsnews.com/news/mental-illness-health-care-insu... The ACA attempted to make things more fair in terms of appealing denials and mandating certain coverages. It's not reasonable to believe tha…

> profit, at least partly, comes from denying care. This is the same as saying Dole makes part of their profit by selling rotten bananas. A factual statement but the implication of it is incorrect. The bulk of Aetna's business is to sell health insurance to healthy people. Its cheaper to never provide service than to deny payouts. > Yes the $500 million comes from stock price increase. But that comes from profit Stoc…

Revenue comes from selling policies. The company has a financial incentive to deny care because that increases the profit. It's one way they try to control expenses and thereby increase profit. After Katrina State Farm famously denied coverage to many people on the grounds that it wasn't storm damage but rather flood damage. Companies that have an incentive to get out of spending money generally try to do so. Health insurance companies hire people for the express purpose of looking for loopholes and ways to deny coverage. This is well documented.

You have in the comment above and in other comments spoken in terms of what could be. Do you have evidence that Aetna's valuation was not based on profitability? Do you deny that Aetna has a financial incentive to deny coverage or to look for ways to get out of paying for coverage? Do you believe that the $500 million for one person is money well spent in the U.S. healthcare system?

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#113

Post by pc86 » Tue, Dec 05, 2017, 7:18 PM UTC

new-account-9 wrote: post #77

chasing wrote: post #23

Earlier quoted context omitted.

Directional decisions aren't the only important decisions. And, yes: Non-C-level execs make directional decisions all the time. Especially in a company the size of Aetna.

If you get the big decisions correct, then your company can survive many incorrect small decisions. If you get the big decisions incorrect, then your company will not survive even if all the small decisions are correct.

    [citation needed]

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#114

Post by nkrisc » Tue, Dec 05, 2017, 7:22 PM UTC

mudil wrote: post #62

nathantotten wrote: post #11

Earlier quoted context omitted.

I know this is off topic from this thread, but I’m honestly curious as to why you think this. What evidence exists to support your statement? Normally, I would just assume this type of comment is simply trolling, but I looked at your profile and it seems you are a real person with generally intelligent comments so now I’m curious.

I didn't read the budget, and likely you didn't read it too. We can't do all things at the same time, so we have experts to take care of things. (Say, you get a CT scan, you are not going to view it and interpret it, your radiologist will.) The same with the budget: I trust the president and the Republicans, as I take their word for it.

Interesting you make this point, because experts seem to disagree with your belief.

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#115

Post by maxerickson » Tue, Dec 05, 2017, 7:22 PM UTC

Nrsolis wrote: post #107

maxerickson wrote: post #100

Earlier quoted context omitted.

What's your point? You think I should keep my opinion to myself or something?

I don't understand the animus towards CEO pay. It can easily be applied to any major celebrity or athlete. If anyone could do what they do, they'd be paid accordingly. The market (via the shareholders) sets the rate of pay. Why the general public cares about one and not the other is beyond me.

My post questions the ability of the market to price CEO value a lot more than it expresses outrage.

Athletes and celebrities are different, their pay is a natural consequence of gathering lots of attention. A more rational species would substitute cheaper entertainment.

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#116

Post by aaavl2821 » Tue, Dec 05, 2017, 7:25 PM UTC

itamarst wrote: post #111

aaavl2821 wrote: post #109

Earlier quoted context omitted.

i disagree. point by point: * from 2014-2016, aetna's revenue has increased by 9%, its net income by 10%, and its stock price by 82%. i didnt check all the way back to the beginning of the current ceo's tenure, but id imagine it is a similar trend. stock prices and profitability are not as well correlated as wed like to think * why do you say aetna adds no economic value to society? i understand if you have a high de…

Health care is valuable. Health insurance is mostly a scam in the US, a way for insurance companies to take a cut without adding any value. Talk to someone who has lived in countries with socialized medicine (as I have): other countries systems' aren't perfect, but they deliver better results, with less money, and without insurance companies taking massive profits for doing nothing but denying claims. Full disclosure…

health insurance companies are not perfect, but id argue they are more a product of the imperfections of the us healthcare system than a cause of the imperfections

private health insurance is needed as we do not have public insurance for everyone. even in countries like the UK, which tend to have better outcomes and lower cost, private health insurance exists. it gives people more options if they are willing to pay and can afford it

health insurance companies are easy to scapegoat, but in reality they are not usually price gouging, but usually only responding to cost increases by hospitals and health systems. health insurance companies under the ACA must pay out 80% of premium revenues as medical claims. when you add administrative costs, health insurance companies have a structural profit ceiling of like 5%. however increasingly consolidated providers are getting more pricing power and charging more, so the insurance companies have to increase premiums or lower costs (claim denials) to protect their structurally thin margins

insurance companies certainly do terrible things like not paying things and literally inventing coding errors to deny payment. however, in many cases this is mitigated by the healthcare provider taking assignment of insurance and dealing with all this on your behalf. although insurance companies can and do make life harder for docs and influence behavior. but even in countries with "socialised medicine" doctors are influenced (perhaps more strongly) by payers.

tldr, dont hate the player hate the game

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#117

Post by rukittenme » Tue, Dec 05, 2017, 7:51 PM UTC

yequalsx wrote: post #112

rukittenme wrote: post #110

Earlier quoted context omitted.

> profit, at least partly, comes from denying care. This is the same as saying Dole makes part of their profit by selling rotten bananas. A factual statement but the implication of it is incorrect. The bulk of Aetna's business is to sell health insurance to healthy people. Its cheaper to never provide service than to deny payouts. > Yes the $500 million comes from stock price increase. But that comes from profit Stoc…

Revenue comes from selling policies. The company has a financial incentive to deny care because that increases the profit. It's one way they try to control expenses and thereby increase profit. After Katrina State Farm famously denied coverage to many people on the grounds that it wasn't storm damage but rather flood damage. Companies that have an incentive to get out of spending money generally try to do so. Health…

> Do you have evidence that Aetna's valuation was not based on profitability?

No. But if you read the comment of the person I originally responded to, you'll see that this discussion is irrelevant to the overall point. Any clarification of Aetna's valuation has been for your understanding of stock valuations in general. Not to pursue some point about Aetna's ethical or unethical valuation.

> The company has a financial incentive to deny care because that increases the profit.

> Do you deny that Aetna has a financial incentive to deny coverage or to look for ways to get out of paying for coverage?

Yes, categorically. If Aetna signs an agreement to pay health expenses and fails to follow through they face three major consequences:

- They can be sued for breach of contract.

- They can lose market power as their brand loses public trust.

- They can face fines from government regulators.

If Aetna is denying claims that they were never contractually obligated to pay in the first place, then I see that as fraud prevention.

> Do you believe that the $500 million for one person is money well spent in the U.S. healthcare system?

Why should I even have an opinion on the subject? I have never given Aetna or CVS my business. It's not my money they're swapping.

CVS is in a highly competitive market segment. If they were ripping off their customers they would have never acquired the market power to pay this CEO a bonus of $500m.

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#118

Post by pc86 » Tue, Dec 05, 2017, 7:58 PM UTC

yequalsx wrote: post #71

maxerickson wrote: post #63

Earlier quoted context omitted.

Sort of. It's clearly stated that some of it is from growth in the value of stock that he has been compensated with, that value (the growth of the stock) isn't literal profit from healthcare, it's market pricing of the future ability of Aetna to profit on healthcare. And then there is some reason to consider how much delivered value the profit is associated with. If patients reaped similarly large amounts of value fr…

That's a fair point. But the value in stock comes from profit which comes from...

> the value in stock comes from profit

You haven't been following Wall Street very long, have you?

The stock price gain is something like 8-9x the profit gain for Aetna. This money would not have paid a single claim, ever.

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#119

Post by elvirs » Tue, Dec 05, 2017, 8:14 PM UTC

sverhagen wrote: post #53

elvirs wrote: post #35

Earlier quoted context omitted.

would you accept $50 bonus and $1 to each of your 450 covorkers if you were set to receive $500 bonus instead?

Interesting how that question is phrased. Would you accept $50 (million dollar)? Hell yeah. What would you choose between $50 and $500. Maybe $500, not sure if I could live with myself, but I can see how some people would. But why is $500 even on the table? Why isn't someone (a board, a shareholders' meeting) telling this guy: $50 (million) should be enough.

because that bonus is based on how much he saved or made for that company. he/she must have saved/made the company at least 3 times as much and was promised the bonus by that same board if he achieves the goal. board does not gift him the bonus, board owes him.

Re: Aetna CEO Set to Reap About $500M If CVS Deal Closes

#120

Post by prklmn » Tue, Dec 05, 2017, 8:38 PM UTC

aaavl2821 wrote: post #116

itamarst wrote: post #111

Earlier quoted context omitted.

Health care is valuable. Health insurance is mostly a scam in the US, a way for insurance companies to take a cut without adding any value. Talk to someone who has lived in countries with socialized medicine (as I have): other countries systems' aren't perfect, but they deliver better results, with less money, and without insurance companies taking massive profits for doing nothing but denying claims. Full disclosure…

health insurance companies are not perfect, but id argue they are more a product of the imperfections of the us healthcare system than a cause of the imperfections private health insurance is needed as we do not have public insurance for everyone. even in countries like the UK, which tend to have better outcomes and lower cost, private health insurance exists. it gives people more options if they are willing to pay a…

Ask yourself this question - how do insurance companies in general add value? Forget payout for a moment. Their value is added in deciding what rates to charge people, and determining if a claim is valid, that's it. Anything else they do is value subtraction. Their profit drivers come from raising premiums and denying more claims, both things kill value. You make a good point about providers consolidating, and the same point should be made about health insurance companies consolidating.