Losing Aetna Headquarters May Not Mean Losing Workers

June 01--The announcement Wednesday by Aetna Inc. that it's negotiating with other states to move its headquarters out of Hartford is more of a psychological blow than an economic hit, but only if the health insurer's thousands of jobs remain in Connecticut.

Aetna, a Hartford staple since 1853, said it's in talks with several states regarding a headquarters relocation, with the goal of broadening access to "innovation and the talent that will fill knowledge economy-type positions." It provided no other details.

The health insurer said it remains committed to its approximately 6,000 employees in Connecticut and at its Farmington Avenue campus, and hopes to have a "final resolution" by early summer. Aetna employed 49,500 employees as of Dec. 31, 2016.

Gov. Dannel P. Malloy told news reporters he believes the "vast majority" of Aetna's jobs will remain in Connecticut.

"It is my own opinion that this has more to do with their desire to have executive leadership operate in a larger, more vibrant urban center than Connecticut can currently offer," he said. "We all know that employers, especially large employers, are attracted to city centers."

Joseph J. McGee, vice president of public policy and programs at the Business Council of Fairfield County, said Connecticut benefited from the decline of cities in the 1960s and 70s. Industry and residents fled high-crime, financially broke urban areas for suburbs such as Fairfield County.

New York, Boston and other cities have since rebounded, reducing crime, improving their finances and becoming attractive to businesses and workers. At the same time, Connecticut pursued a "suburban-led strategy," successfully promoting its financial services and insurance sector, but was "disconnected from innovation."

Hartford Mayor Luke Bronin used the news to punctuate a point he's made for months -- that the state can help itself by investing in its urban centers. Hartford, struggling financially and described by city leaders as being on the brink of bankruptcy, is seeking tens of millions of dollars more in state aid next year to balance its budget.

"What we have to do as a state and as a city is look ourselves in the mirror and resolve to make the changes that need to be made," Bronin said. "I think the decision that Aetna seems poised to make reinforces the argument that we've been making for the better part of a year, which is that if Connecticut wants to remain economically competitive, we have to be a place that has strong and vibrant cities, strong and vibrant metropolitan areas, where companies can attract talent and retain talent."

McGee said Stamford has built ample housing to attract young workers who might otherwise head to New York City. But Connecticut "should be a leading force of digital change," he said.

Aetna's announcement had the affect of a piling-on on of bad news for Connecticut. Economic growth trails most of the rest of New England, the state is unable to recapture all jobs lost in the recession, and public spending continues to be slashed to keep up with falling tax revenue.

Joe Brennan, president of the Connecticut Business and Industry Association, said Aetna's decision raises familiar issues. "All the things we've been talking about," he said. "Getting our fiscal house in order and making the state competitive will be paramount."

Oz Griebel, president of the MetroHartford Alliance, the region's chamber of commerce, said a headquarters move might give other companies pause if they consider moving to Hartford.

"If the move is ultimately decided and executed it will, like the GE move, create a negative perception about why," he said.

The finance and insurance sector posted 131,200 jobs in Connecticut in April, down slightly from January, but reaching the highest number in nearly four years.

"We're still in decent shape," said Susan Winkler, executive director of Connecticut Insurance and Financial Services, a business association. "We are, in fact, the insurance capital of the United States."

Chief Executive Officer Mark T. Bertolini has spoken before about Aetna's Hartford headquarters. He told shareholders last year that the company was required to establish a presence in Kentucky when it sought to acquire Humana Inc., which is based in Louisville.

"We had to make that commitment in order to get the merger done," Bertolini said. "Having said that, the rest of all of our real estate is under review."

The $37 billion deal was ultimately blocked in court and the two sides abandoned it.

Peter Kochenburger, a professor and specialist in insurance and consumer law at the University of Connecticut School of Law, downplayed the loss of the corporate headquarters.

"Absent a significant move of jobs, it probably isn't significant," he said. "It obviously has a psychological impact even if the practical impact is pretty small."

Kochenburger cited Travelers, which left Hartford in 1993 and established its headquarters in New York, while remaining the largest employer in the city. Aetna could do the same, "but it certainly doesn't have to," he said.

Richard Pomp, a professor at the UConn School of Law, offered another explanation for corporations to set up shop in larger cities: access to major airports with direct flights not as readily available at Bradley International Airport.

"It's been an embarrassment that the governor has not been more successful in getting major nonstop flights out of Bradley," he said. "It's a backwater."

Pomp said shifts in corporate headquarters have a positive impact in one respect: "It's a great opportunity to shed a lot of dead wood at the senior level," he said. "With every relocation, there's a certain amount of senior management who won't make the move."

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