Insurers Eye Medicare Advantage Acquisitions
In the past 12 months three health insurers, HealthSpring, WellPoint, and Humana, have each acquired a Medicare Advantage HMO. Expect to see even more growth as businesses begin to shift their 65 year-old and older retirees off of employee -sponsored plans and onto Medicare Advantage plans.
Growth in the baby boomer population is among the factors driving interest in Medicare Advantage companies. In past 12 months three health insurers, HealthSpring, WellPoint, and Humana, have each acquired a Medicare Advantage HMO.
Since 2005, the number of beneficiaries enrolled in Medicare Advantage managed care plans has more than doubled from 5.3 million to 11.1 million in 2010, according to the Kaiser Family Foundation.
Expect to see even more growth as businesses begin to shift their 65 year-old and older retirees off of employee -sponsored plans and onto Medicare Advantage plans.
"People who are turning 65 years old now have experience with managed care and they are comfortable with it," said Sarah James, an analyst who focuses on health insurance companies for Los Angeles-based Wedbush Securities.
And competition is heating up as well-financed players such as Aetna, Humana, WellPoint and UnitedHealth look to increase their share of the market. James expects to see more acquisitions of smaller Medicare Advantage companies as healthcare reform kicks in and economies of scale become even more important. "The Medicare Advantage market is very fragmented and it's getting more difficult to be a small player."
James explains that certain Affordable Care Act provisions such as the medical loss ratio requirement will be difficult for smaller companies to achieve. Beginning this year the ACA requires health plans to spend 80% to 85% of premium revenue on reimbursements for clinical services and activities that improve health care quality.
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