Daily Management Review

New Buyouts Could Be Spurred By U.S. Government's Bid to Block Insurance Mergers


07/23/2016




New Buyouts Could Be Spurred By U.S. Government's Bid to Block Insurance Mergers
More mergers likely in America’s largest health insurance sectors are on the list after the potential bust-up of two mega deals among the country’s largest health insurance companies.
 
Citing reasons that mergers of large insurance companies would cut competition and boost rates for patients, Aetna Inc's $37 billion purchase of Humana Inc and Anthem Inc’s proposed $54 billion buyout of Cigna Corp were blocked by the U.S. Department of Justice.
 
The is likely to be another buying spree by the four insurers, this time of smaller insurers less likely to raise the ire of regulators if no settlement is reached for one or both deals.
 
"Unless the market changes drastically, I don't see another major deal going through. But with smaller deals there's more potential to get something done," said Norman Armstrong, a partner at King and Spalding LLP who focuses on antitrust.
 
According to analysts and investors, midsized, national players in government healthcare plans such as Centene Corp, Molina Healthcare Inc, or WellCare Health Plans Inc, are the likely and the most obvious targets for the buying spree.
 
Acquiring these companies would offer a foothold in markets likely to grow rapidly in coming years even though such acquisitions would not produce the big boost to earnings sought by the planned mega mergers. Such new markets could be the Medicare Advantage coverage for the elderly and the Medicaid health plans for the poor.
 
As states outsource more responsibility for the government insurance program to private companies, the private Medicaid plans is benefiting and the market is worth more than $100 billion market and both Molina and Centene have large exposure to this market.
 
According to a source familiar with the matter Aetna sought to divest Medicare Advantage plans to win approval for its Humana deal and Molina and WellCare were also said to be interested in Medicare Advantage plans.
 
Interest in acquiring Medicare and Medicaid members has already been expressed by Anthem. Simply Healthcare Holdings, a managed care company for government health insurance in Florida was purchased by it in 2014.
 
A deal is that the company is not likely ready to sell is the biggest impediment in the case of Centene. According to its spokeswoman Marcela Manjarrez Hawn, Centene sees itself as an acquirer, not a target. Centene acquired peer HealthNet for $6.3 billion earlier this year
 
"We believe it will be difficult for anyone to pay what we will be worth in the next 12 months," she said in a statement.
 
According to Ana Gupte, an equities analyst at Leerink Partners, Magellan Health Inc, an insurer that focuses on niche types of patients is another option. Gupte said at a time when high prices for specialty drugs are attracting increasing attention, buying Magellan could help insurers build out their capabilities in dealing with specialty products.
 
While Anthem, Molina, Humana, and WellCare did not immediately respond to requests for comment, Aetna, Cigna and Magellan declined to comment.
 
However antitrust approval is required even for these smaller deals.
 
 “The [ Justice Department] is on ‘high alert’ right now, so maybe even a smaller deal is harder than in the past,” said Gupte.
 
A shareholder in Humana who asked not to be named because he was not authorized to talk to the media said that until after the U.S. presidential and congressional elections in November, when the prospect of big health insurance combinations will be less politically charged, any follow-up deals are likely to be delayed to avoid the most intense regulatory scrutiny.
 
(Source:www.reuters.com) 






Science & Technology

China's first solar power molten salt plant sets record

WSJ announces imminent start of Boeing 737 MAX flight tests

Study: Machine learning is five times more harmful for the environment than a car

Would Singapore Be The First One To Bring Lab Grown Shrimps To The Global Market?

Apple Patents A ‘Foldable Screen’ For Creating Foldable iPhones

Research Shows Air Pollution Causing Birth Defects

Microsoft tells about operating system of the future

Study: Third of US kids wake up at night to check their smartphones

Deepfake AI Technology Used By Researchers To Bring Mona Lisa ‘To Life'

China is developing technology to capture greenhouse gases

World Politics

World & Politics

‘Climate Neutrality Must Be Achieved By 2050’: The EU Bloc Leaders

All Out US-Iran War Unlikely After Downing Of American Drone, Say Analysts

A number of airlines stop flights over the Strait of Hormuz

Former UEFA President detained to testify in a corruption case

Iranian Foreign Minister urges other countries to abandon the dollar

The EC recommends starting penalty procedure against Italy

European Breweries To Up Their Brewing Innovation Amid Green Legislations

‘Frequent’ Shootings Causes China To Issue Travel Advisory Against US To Its Citizens