For Immediate Release
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
Revenue from managed-care plans of Medicare Advantage is expected to grow significantly as baby boomers retire. Medicare Advantage is a privately-run version of the government's Medicare insurance program for the aged and disabled.
Managed-care is expected to get a lot more attention as the federal and state governments try to reduce costs. The now-unsuccessful Congressional "Super-Committee" looked into trimming some of the funds out of the federal health care programs, but failed to reach a bipartisan agreement. Major cuts to the Medicare program, whenever it happens, will shift some of the costs to seniors.
This could, in turn, be good for health insurers, making their Medicare Advantage plans more attractive than traditional Medicare plans. Moreover, many individuals would look forward to supplementing government coverage with private insurance, boosting demand for Medicare Advantage plans. But reforming the government health care program has proven to be very difficult politically.
Until now, only two of the public providers – UnitedHealth (UNH) and Humana (HUM) -- control more than 10% of the market. However, we expect sharp consolidation in this market. Carriers in the health insurance sector are in a race to win Medicare Advantage market share and the fastest way of achieving the target is to acquire a company in the same business.
Following are some of the recent M&A activities in this arena:
Cigna (CI) acquired HealthSpring Inc. for $3.8 billion in January this year. UnitedHealth's acquisition of XLHealth Corp, a sponsor of Medicare Advantage health plans in November 2011, is the next big deal, worth $2 billion. The acquisition of Preferred Care Partners (Preferred Care) and Medica HealthCare Plans (Medica) are pending. Earlier in 2011, UnitedHealth acquired Inspiris, which serves patients in Medicare, Medicaid and commercial insurance populations.
On October 1, 2011, Aetna (AET) closed its acquisition of Genworth Financial Inc.'s (GNW) Medigap business for $290 million.
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