Overview of the company
Aetna Inc. is a differentiated healthcare aids corporation. The company proposes a variety of classic, voluntary, and patient-oriented health insurance goods and associated facilities, as well as therapeutic help, dispensary, social health, communal life and ill health strategies, health organization capabilities, Medicaid healthcare supervision, Medicare benefits and Medicare extra strategies, workers’ reimbursement organizational services and health IT products and amenities, such as liable care resolutions.
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The corporation functions through three sectors: healthcare, group coverage, and retirement fund. The corporation’s customers consist of proprietor assemblies, individuals, university students, part-time employees, health campaigns, healthcare benefactors, administrative components, Government-funded campaigns, labor unions, and emigrants.
The company’s healthcare sector’s goods and services comprise medicinal, pharmacy profit supervision amenities, dental, social health, and vision strategies obtainable on both a covered foundation and a proprietor-sponsored or managerial services basis and developing industries products and services. Medicinal goods embrace point-of-provision, favorite benefactor association, health sustenance association, and insurance profit plans.
Remedial products also contain health investment accounts and Aetna HealthFund, patient-oriented health strategies that amalgamate traditional point-of-provision or favorite benefactor association and/ or dental insurance, with an accruing profit account, which may be subsidized by the strategy sponsor and/ or the associate in the setting of health investment accounts. The company also proposes Medicare and Medicaid goods and facilities, and other health products.
The sector’s chief goods and facilities tend to content multi-location nationwide, average-sized, and small companies. It also aids different insureds, emigrants, and, in some marketplaces, Medicare and Medicaid recipients and benefactors. On top of these key marketable healthcare goods, in several locations, the corporation similarly proposes Medicare benefit campaigns, Medicare enhancement strategies and prescription medication handling for Medicare payers, and takes part in Medicaid and sponsored kids’ health coverage agendas.
The company’s economic issue
The Aetna U.S. health services supervised care policy depends primarily on millions of membership records and billions in returns to lean on doctors and infirmaries to partake at low recompense rates. The corporation is looking to cover the organizational excess of exploitation administration. It has to distinguish dilute adversative choice from feeble endorsement. Moreover, there is a necessity to spur unremitting restatement of lower charges, lower percentages, and supplementary development.
The firm has to take the health management product to the top of the market. The company does not chase the small-cluster market enthusiastically, undertake Medicare risk bonds, and pledge itself to being not just the most extensive health strategy all over the country but a leading strategy in the most densely inhabited areas, including California, Florida, Texas, and New York. At the edge of the prior decade, after riveting New York Life and Prudential healthcare companies, Aetna was still not as performant as it should be.
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Concerning the number of affiliates and coast-to-coast agreements, it has all the chances to become the most important actor in a business dedicated to reducing expenses for buyers and multiplying incomes for stockholders (Boland, 2012).
The consumer repercussion against system limitations and exploitation review reached its peak in the recent years, and Aetna has to propose a seamless target for the mainstream culture that doubts big corporations as much as large administration. The benefactors are in the full insurgency, uniting their resident markets and requesting for rate increases, petitioning over postponements in compensations and rejections in the authorization, and, in some cases, merely giving up on the health management organization networks (Boland, 2012).
Identifying and developing an economic theory
The theory of rational expectations assumes that prospects are designed when financial managers see new changes in the economy, and they rationally presume the opportunities based on the evidence they have (Angeli, Amrit, & Rawlings, 2012). The theory of rational expectations stresses the impacts of variations in economic strategy upon potentials, even though the theory is not controlled by the strategy pronouncements alone.
Apparently, the concept of rational expectations assumes a comparatively high degree of financial complexity amid those who reach commercial verdicts (Boland, 2012). It also deduces that individuals have admittance to (or even take into account) the data on the economy, such as the monetary stock development rate, the taxation percentage, etc. With lucid expectations, there is generally a much smaller lag in reply time between the primary impetus and the establishment of expectations.
From time to time, rational expectations are designed instantly, while adaptive outlooks may take a really long period of time to form. The problem relating the monetary stock development rate may serve as an example (Angeli et al., 2012). With rational expectations, practically the moment it becomes recognized that the money stock has vividly amplified, inflationary outlooks start forming. Taking into consideration the adaptive expectations, the situation is more intricate. It may be the case that the high monetary stock development rate does ultimately cause price increases (Boland, 2012). This may not occur up until several months have passed. In this case, the theory presupposes that adaptive prospects of price increases (inflation) are shaped only when the price rises are essentially experienced.
Applying the theory to the company’s situation
One of the crucial steps that the company’s management team should take is to repair the relations with both medical workers and patients (Keat, Young, & Erfle, 2013). In compliance with the theory of rational expectations, Aetna has to change many of the obstructive guidelines that it had employed in an effort to cover the expenses. Moreover, it would be rather reasonable to provide richer information on insurance to both medics and consumers.
This would help get the payments going and diminish the effect of inflexible conventionality. The assumption based on the theory of rational expectations also presupposes that Aetna should reach an agreement with its business competitors and, as a result, settle an immense class-action claim that would explicitly assist the country’s key managed-care providers. The claim, embracing approximately all of the U.S. doctors, should carry out several protests, together with biased advertising practices and intrusion in treatment endorsements. The value of the settlement should be thoroughly estimated and assessed by the company experts (Keat et al., 2013).
On the basis of the theory of rational expectations, Aetna also could introduce new health campaigns that would give plan affiliates more authoritative control over their health plan choices and help the company keep a perfect balance between profit rates and eminent client services. To restore the business’s finances, the management should cut a reasonable number jobs and increase coverage percentages by about 15 percent per annum to keep in advance of medicinal price rises (Keat et al., 2013).
Another stage would be to minimize the number of idle Aetna’s customers by forsaking loss-making markets, together with nearly half of the regions countrywide in which it presented its Medicare goods. Because of the losses in affiliation, Aetna would no longer be the country’s principal managed-care guarantor, but it would appear to be a more solid corporation.
Angeli, D., Amrit, R., & Rawlings, J. B. (2012). On Average Performance and Stability of Economic Model Predictive Control. IEEE Transactions on Automatic Control, 57(7), 1615-1626. Web.
Boland, L. A. (2012). The Methodology of Economic Model Building: Methodology after Samuelson. London: Routledge.
Keat, P., Young, P., & Erfle, S. (2013). Managerial Economics: Economic Tools for Today’s Decision Makers (7th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.