Are Medicaid insurers poised for takeovers?

August 5, 2014 | By Dina Overland

As insurers continually point to providers' bargaining power as a primary driver of growing healthcare costs, many may work to boost their own market strength by buying up smaller companies.

Health analysts believe that Medicaid insurers, including Centene, Health Net, Molina and WellCare, are particularly poised for a merger or acquisition from larger insurers like Aetna, Cigna, Humana or UnitedHealthcare, reported Healthcare Payer News.

"We're likely to see M&A heating up, as soon as the back half of this year," Brian Wright, an analyst at Sterne Agee, told HCPN. He added that the takeovers will likely be driven by for-profit insurance companies.

But some insurance execs indicate that now isn't the right time to make a deal. For example, Humana CFO Brian Kane, a Goldman Sachs and healthcare M&A veteran, said during a recent meeting with analysts that consolidation among nationwide insurers isn't likely until at least 2017. That's because the healthcare industry's political and regulatory climate is still evolving, especially as a new presidential administration will soon oversee the industry, he added.

Although Aetna CEO Mark Bertolini largely agrees with Humana's Kane, he has said his company is still in the process of optimizing its Coventry acquisition. Aetna bought Medicaid insurer Coventry for $5.6 billion in 2012, FierceHealthPayer previously reported.

"I think if you're thinking about big M&A, we continue to want to meet our needs relative to Coventry. We have to finish the integration, which we are close to getting to," Bertolini said during a recent conference call, noted HCPN.

But that doesn't mean mergers and acquisitions are off the table for Aetna. Instead, the insurer wants to buy technology and service companies instead of other health plans.

To learn more:
- read the Healthcare Payer News article