The low share prices of health plans make for cheap deals – that’s the growing sense among the larger health plans, who see the current dip in values as a buying opportunity.
Among the big boys likely to be looking are Wellpoint, United, and HealthNet. While Cigna and Humana would love to be growing via acquisition, that’s not in the cards as they are struggling mightily. In particular, Cigna is in the midst of layoffs, an event that likely precludes any deals over the near term.
Wellpoint is among those looking to do deals. CEO Angela Braly was quoted recently saying “I even feel stronger about that [their ability to acquire health plans] in terms of the execution that we’ve really displayed over this past year…We really have a much more stable and efficient and effective claims operation, and we can bring that to new partners in an acquisition.”
UnitedHealthcare was built on acquisitions; the once-small midwest health plan grew by buying up other health plans in regional markets, later getting big enough to snap up giants including Pacificare. I expect United is already talking with Coventry CEO Allen Wise.
California-based Healthnet is the big health plan least likely to be looking for acquisitions. It has been hit hard by scandal and operational problems, and appears to be working on straightening out internal operations.
Aetna is a bit of a wild card. The most conservative of the big plans, it typically does not look to buy plans, but rather grows organically and through strategic acquisitions of companies with specific expertise in targeted markets. Lately that has meant Medicaid and specialty business. I don’t see that changing. That said, there may be some very good deals out there; low stock prices may cause even the staid ‘mother Aetna’ to open her pocketbook. In the end, the cautious nature of Aetna senior management will likely stop any deal before it goes too far. And who can blame them?; there’s a lot of damaged goods out there.
What does this mean for you?
The big will keep getting bigger.
Jan
30
The big get bigger. This concept is one of the reasons our banking industry is in such economic turmoil. With “bigness’ grew greed resulting now in foreclosures, credit woes, business’ going bankrupt, unemployment increasing. With the “big” companies of health care getting bigger is it only time before this scenario plays out again?
I have to laugh at Ms. Braley’s comments about Anthem’s claim system efficiencies. This is so far flung – they have not even scratched the surface of bringing their assets into a common operating system!
I agree that Aetna will continue with its organic growth strategy. It seems to work well for them.
I have to agree with the other Rick. I hope some of the states’ insurance commissioners grow a set and start fighting back against future megamergers. Could you imagine the problems that would be caused by a health insurer “too big to fail”? Perhaps we have a couple already.