Purchase to bolster insurer
August 21, 2012, Tuesday
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Print Edition
Print Edition
AETNA, one of the biggest US health insurers, staked a US$5.7 billion claim in the burgeoning market for government-funded coverage yesterday when it announced plans to buy fellow insurer Coventry Health Care.
The Hartford, Connecticut company's proposed cash-andstock acquisition of Coventry will bolster its Medicaid enrollment months before millions of uninsured Americans are expected to become eligible for coverage through that state-federal program as part of President Barack Obama's massive health care overhaul.
The deal also ramps up Aetna Inc's Medicare Advantage and Medicare prescription drug businesses, as interest in these plans grows while the baby boomer generation ages and becomes eligible. Medicare Advantage plans are privately-run versions of the government's Medicare coverage for the elderly and disabled people.
Aetna said yesterday it will pay US$42.08 for each share of Coventry stock. That includes US$27.30 in cash and a portion of its stock. The price is a 20 percent premium on Coventry's Friday closing price of US$34.94.
The US$5.7 billion deal's value rises to US$7.3 billion when counting debt from Coventry Health Care Inc, which is based in Bethesda, Maryland. Medicaid is the state-federal program that provides coverage for the needy and disabled.
States hire insurers to offer Medicaid coverage to their residents. The program covers more than 60 million people and is expected to expand coverage starting in 2014, or about six months after the Coventry deal is projected to close.
Insurers also see growth opportunities in Medicaid due to patients who are eligible for both that program and Medicare.
The Hartford, Connecticut company's proposed cash-andstock acquisition of Coventry will bolster its Medicaid enrollment months before millions of uninsured Americans are expected to become eligible for coverage through that state-federal program as part of President Barack Obama's massive health care overhaul.
The deal also ramps up Aetna Inc's Medicare Advantage and Medicare prescription drug businesses, as interest in these plans grows while the baby boomer generation ages and becomes eligible. Medicare Advantage plans are privately-run versions of the government's Medicare coverage for the elderly and disabled people.
Aetna said yesterday it will pay US$42.08 for each share of Coventry stock. That includes US$27.30 in cash and a portion of its stock. The price is a 20 percent premium on Coventry's Friday closing price of US$34.94.
The US$5.7 billion deal's value rises to US$7.3 billion when counting debt from Coventry Health Care Inc, which is based in Bethesda, Maryland. Medicaid is the state-federal program that provides coverage for the needy and disabled.
States hire insurers to offer Medicaid coverage to their residents. The program covers more than 60 million people and is expected to expand coverage starting in 2014, or about six months after the Coventry deal is projected to close.
Insurers also see growth opportunities in Medicaid due to patients who are eligible for both that program and Medicare.
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