Aetna at Crossroads: Can Karen Lynch Lead the Company Back to Health?

Case Code: LDEN225 Case Length: 20 Pages Period: 2000-2024 Pub Date: 2025 Teaching Note: Available

Price: Rs.400 Organization : Aetna Inc. Industry :Pharmaceuticals & Biotech Countries : United States Themes: Strategic Leadership, Stakeholder Management, Crisis Management,Strategic Planning

Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Aetna’s Early Growth Journey

Aetna’s origins could be traced back to 1819 when merchants in Hartford, Connecticut, US, established the Aetna Fire Insurance Company. By 1850, the company had evolved into Aetna Life Insurance Company, expanding its offerings to include life insurance, property insurance, farm mortgages, and various forms of healthcare coverage. The company grew in proportion to the growth of the American economy and became known for providing insurance that could protect anyone, anywhere, against almost anything. In 1973, Aetna ventured into healthcare by creating its first HMO. By 1985, it had become the largest private health insurer in the US, entering joint ventures and expanding its healthcare offerings nationwide..

Aetna 2.0 With The Advent of Managed Care Model

When Rowe became CEO in late 2000, employees were skeptical about Aetna being able to transform itself. Rowe and his team identified that the primary reason for Aetna’s struggle for growth was its excessive focus on managing medical expenses that led to alienating patients and physicians. Rowe highlighted the need to preserve the company’s cultural strengths that included concern for patients and pride and respect for the physicians. Rowe’s turnaround strategy, ‘the New Aetna’ strategy, aimed to build a strong brand, win a position in health insurance, and attract patients and providers, a change traditionally resisted by ‘Mother Aetna’. The top management initiated interventions to revitalize Aetna’s culture without referring to it as “cultural change.”..

Aetna Under CVS Health

In November 2018, CVS Health, an American healthcare company, officially completed its $69 billion acquisition of Aetna, marking a significant milestone in the healthcare industry. This acquisition combined one of the country’s largest pharmacy chains with one of the biggest health insurers, creating a healthcare giant poised to transform..

Challenges Post Covid-19 Pandemic

Aetna’s Medicare Advantage business posed serious hurdles, particularly in 2023. As the year went on, it became evident that higher-than-expected utilization rates were putting pressure on the Medicare Advantage market. Medical expenses increased as a result of patients utilizing outpatient treatments and supplemental benefits at far higher rates than were projected. New demands in the inpatient services and pharmaceutical sectors made the situation worse. Aetna’s capacity to effectively compete in the Medicare market was also harmed by a decline in its Medicare Advantage star rating.

Lynch’s Comeback to AETNA

Following Aetna’s acquisition by CVS in 2018, Lynch continued in her position and guided CVS Health through the COVID-19 pandemic as the previous head, Larry Merlo, had retired. This was true even though Lynch had had a near-fatal accident in 2019 while she was riding in the Netherlands and had flown over the handlebars of her bike onto a cobblestone street. Luckily, her ribs were only bruised and she suffered a broken hip and wrist. Lynch took advantage of her hospital stay to witness firsthand the CVS customer experience before returning to the US for surgery to pin her hip back together..

The Road Ahead

On August 27, 2024, Aetna made a historic policy change by expanding its coverage for intrauterine insemination (IUI) under eligible plans. It thereby became the first major insurer to offer this comprehensive coverage on a national level. This policy revision reflected Aetna’s commitment to serving diverse communities by making IUI accessible not just as a fertility test, but also as a method to improve the chances of pregnancy. The change was groundbreaking as it extended family-building options to individuals, regardless of their sexual orientation or partner status..

Exhibits

Exhibit I: Financing the US Healthcare System
Exhibit II: Product Offerings of Major Players
Exhibit III: Aetna’s Insurance offerings (1853-1951)
Exhibit IV: About Aetna
Exhibit V: Market Capitalization of Aetna and Competitors (2001-2016)
Exhibit VI: About Karen Lynch
Exhibit VII: About CVS health
Exhibit VIII: Aetna’s Insurance Plans
Exhibit IX: MA Star Ratings
Exhibit X: Adjusted EBIT return on revenue trends for major players

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