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Affordable Care Act driving healthcare mergers

The Washington Post, August 27, 2012

Insurance giant Aetna announced it will buy Bethesda-based Coventry Health Care, which provides Medicare and Medicaid services, for $5.7 billion. Two days later, Ohio-based Health Care REIT announced an $845 million deal to acquire McLean's Sunrise Senior Living. Because insurers are facing new pressures to contain overhead—an ACA provision known as the medical loss ratio requires them to limit spending on administrative costs and salaries to 20 percent, so they can spend at least 80 percent of premium dollars on medical care—they will be looking for ways to reduce overhead expenses. Acquiring smaller insurers to boost enrollment could be the way to do it.