In January, late October and again a week ago, we discussed how the managed healthcare giants are expanding their mergers & acquisitions activities, especially in the senior sector. Here are a few more specifics and developments.
The Seeking Alpha investment website notes UnitedHealthcare’s acquisition for about $2 billion of XLHealth, announced in late November, pointing out it is the 7th purchase by major player of a company manages Medicare coverage. The analyst writing notes, “The U.S. health insurance industry is very fragmented, and appears ripe for consolidation. Health system reform should also encourage mergers and acquisitions in the industry. The big companies are expected to buy up smaller providers in order to increase their share in a particular market or geographic region, and to benefit from economies of scale and efficiency gains.”
XLHealth had been courted by WellPoint and Aetna, major insurers that are trying to gain more Medicare Advantage customers.
Medicare Advantage programs currently have enrollments of almost 12 million, a 75% increase since 2006, outpacing retiree market growth. Over the next 5 years, continued growth is expected in this sector owing to increasing support from the federal government, which sees outsourcing to managed care as a cost-containment strategy.
Current Medicare enrollments of the five largest private health insurers are:
• UnitedHealthcare, 7 million
• Humana, 4.3 million
• WellPoint, 2.6 million
• Aetna, 837,000
• Cigna, over half a million
M&A activity in 2011 before the XLHealth acquisition includes:
• Cigna’s pending purchase of HealthSpring for $3.8 billion, which will add 1.17 million Medicare customers.
• UnitedHealth’s purchase of Inspiris.
• WellPoint’s purchase of CareMore Health Group.
• Aetna’s acquisition of Continental Life Insurance Company.
• Humana’s acquisition of SeniorBridge, MD Care and Arcadian Management Services. (In addition, on December 7th, Humana acquired Anvita Health, a company in another healthcare sector — healthcare analytics.)
Five prime targets likely in the sights of the big players in order to penetrate the Medicare Advantage population further are the following:
• Coventry Health Care ($4.21 billion) has over 5 million members, including 1.37 million Medicare customers, in 50 states. Coventry members receive a range of products and services that include group and individual health insurance, Medicare and Medicaid programs, and coverage for specialty services such as workers’ compensation.
• Amerigroup contracts (with a $2.51 billion market cap) with primary care physicians, specialists, hospitals, and ancillary providers, serving over 1.9 million members in 11 states. Amerigroup itself is involved in acquiring Health Plus, a program with 320,000 members.
• Health Net ($2.29 billion) is a provider of health benefits through health maintenance organizations, insured preferred provider organizations, and point of service plans as well as behavioral health, substance abuse, employee assistance programs, and managed healthcare products for prescription drugs. They serve about 6 million, including 660,000 Medicare beneficiaries.
• WellCare Health Plans ($2.26 billion) is a managed-care services company focused on government-sponsored healthcare programs in the U.S.
• Universal American ($966.24 million) is a company offering Medicare Advantage plans.
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