UNH to Buy Two MA Health Plans - Analyst Blog
March 01 2012 - 12:51PM
Zacks
On Tuesday, UnitedHealthcare, a division of UnitedHealth
Group, Inc. (UNH), announced its intention to acquire two
privately-owned health plans – Preferred Care Partners (Preferred
Care) and Medica HealthCare Plans (Medica). Both these companies
have their operations spread across Florida and serve Medicare
Advantage (“MA”) members.
With this acquisition, UnitedHealth will add 75,000 Medicare
Advantage members to its existing count. While Miami-based
Preferred Care has 50,000 MA members, Coral Cables-based Medica
serves approximately 35,000 MA members. UnitedHealth will also have
an additional 12,200 Medicaid beneficiaries (5000 members from
Preferred Care and 7200 from Medica).
UnitedHealthcare will also acquire Preferred Care’s six primary
care centers located in Miami-Dade and Broward counties and two
medical centers from Medica, situated in Coral Gables and
Hialeah.
The recently announced twin acquisition, which are likely to be
closed at the end of the year, clearly indicates UnitedHealth’s
increasing focus on the MA market. Earlier during the month, the
company completed the acquisition of yet another privately-held
company, XLHealth Corp, a sponsor of Medicare Advantage health
plans for recipients with special needs.
Brentwood-based Inspiris, which provides care and care
management services to elderly patients in Medicare, Medicaid and
commercial insurance populations, was also acquired by UnitedHealth
last year.
A Medicare Advantage is a privately-run version of the
government's Medicare insurance program for the aged and the
disabled.
With an increase in the population of baby boomers, the
companies see ample opportunities in this area over the next few
years. In fact, in the next 25 years, compound annual growth rate
of the Medicare population is expected to increase to 2.7% from
1.5% at present.
Managed care is expected to get a lot more attention as the
federal and state governments try to reduce $1.2 trillion from the
federal deficit over the next decade. Major cuts in the Medicare
program, whenever it happens, will necessitate a shift in some of
the costs to the seniors, making their Medicare Advantage plans
more attractive than traditional Medicare plans. Moreover, many
individuals would look forward to supplementing government coverage
with private insurance, thus boosting the demand for Medicare
Advantage plans.
Carriers in the health insurance sector are in a race to win MA
market share and planning such acquisitions is the quickest way to
achieve the end. An overview of the recent deals will provide us
some idea on the pace of merger and acquisition (“M&A”)
activity in this arena:
- Last month, CIGNA Corp. (CI) completed the
acquisition of HealthSpring Inc. which has a niche presence in the
MA market.
- Also, Humana Inc. (HUM) completed its
acquisition of MD Care, specializing in MA business last
month.
- In October last year, Aetna Inc. (AET) closed
its acquisition of Genworth’s Medigap business for $290
million.
- CareMore Health Group was also purchased by WellPoint
Inc. (WLP) last year.
Such an acquisition spree in a short span of time clearly
manifests stiff competition amongst health insurers and any further
news on the front will not come as a surprise in the coming
months.
AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
HUMANA INC NEW (HUM): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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