There has been a wave of mergers and acquisitions in the health insurer marketplace in recent years, our research for the National Directory of Managed Care Organizations has found.
The numbers of MCOs keeps shrinking, according to our research for the database.
Just the other day Humana announced that it was working with advisers at Goldman Sachs Group Inc., according to people familiar with the matter, the Wall Street Journal reported. “Aetna Inc. and Cigna Corp. are among those that have held preliminary discussions with the company,” the WSJ reported.
“We view this step as a trigger event in a managed-care industry overdue for consolidation, the “analysts at Leerink Partners LLC wrote in a research note Friday afternoon, The WSJ reported.. “We expect the next year will see multiple strategic actions among the major players.”
“It’s sale may trigger consolidation that shrinks the number of large publicly traded health insurers from five down to three, said analyst Ana Gupte, PhD, Leerink’s Managing Director for Healthcare Services.. “It’s a huge push for scale,” she added.
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Executives from Aetna and Anthem Inc. have said in recent weeks they are interested in doing large deals, Reuters reported. Analysts said on Friday that Anthem may also look at Humana.
“The government has pressured health insurers to cut costs with the new Obamacare exchange plans and in Medicare while employers have also gotten tough on spending for medical procedures and drugs,” reported Reuters.
“Acquiring Humana would vault Cigna to the lead in the market for Medicare Advantage policies, the health insurer-run version of the U.S.’s program to cover the elderly and disabled, ” according to Bloomberg. “Cigna currently lags behind UnitedHealth Group Inc., Humana, Anthem Inc. and Aetna Inc. with fewer than 500,000 customers in the plans.”
“Insurers have been largely absent recently in the frenzy of dealmaking and consolidation that has swept the health-care industry,” wrote Bloomberg. “Though with an aging U.S. population and the disruption to insurance markets from 2010’s Patient Protection and Affordable Care Act, the sector may be ripe for deals,”
“Speculation that there will be consolidation among the five publicly traded health insurers has increased in recent weeks, as executives from companies such as Aetna and Anthem Inc have said they are interested in doing large deals,” posted CNBC.
In a related development, Monday reported that it completed its previously announced sale of the stock of its wholly-owned subsidiary, Concentra Inc. (Concentra), to MJ Acquisition Corporation. The deal total was approximately $1.055 billion in cash, Humana said.
MJ Acquisition Corporation is a joint venture between Select Medical Holdings Corporation an operator of specialty hospitals and outpatient rehabilitation clinics in the U.S., and Welsh, Carson, Anderson & Stowe XII, L.P., a private equity fund.
“The divestiture of Concentra demonstrates the company’s commitment to its previously announced business portfolio review, ensuring each business supports the company’s integrated care delivery strategy and earns the appropriate return on invested capital,” Humana said.
Late last month Humana was ranked number one among national commercial payers for “its ease of doing business with providers” for the fourth consecutive year. The health and well-being company ranked third overall among 166 U.S. health insurers based on a review of 2014 claims-payment data conducted by athenahealth.