With enrollments expected to skyrocket, insurers turn to the Medicare and Medicaid markets
WASHINGTON – By 2015, the Centers for Medicare & Medicaid Services anticipates the number of people receiving health insurance via Medicaid will increase by more than 20 million as a result of the Patient Protection and Affordable Care Act. People eligible for Medicare will also increase at a rate of nearly 3 million per year, as the Baby Boomer generation hits retirement age.
So it is no surprise that over the course of 2011 many insurers began making strategic acquisitions of Medicaid and Medicare plans and some even entered the market for the first time.
One significant deal that could make it easier for Blue Cross and Blue Shield Plans to enter the Medicaid market came with the late summer acquisition of Philadelphia-based AmeriHealth Mercy byIndependence Blue Cross and Blue Cross Blue Shield of Michigan.
AmeriHealth Mercy, which serves nearly 800,000 Medicaid members in three states gave the two Blues a significant book of business but also positioned the company to take its Medicaid plans to Blues across the country, a market the non-profit family of insurers have traditionally eschewed.
“With the additional resources this transaction will bring, (AmeriHealth Mercy) is now better positioned to grow in the Medicaid market by offering turnkey, cost-effective, comprehensive Medicaid managed care coverage and services to Medicaid consumers nationwide,” said Independence Blue Cross president and CEO Daniel J. Hilferty in announcing the deal. “This agreement will also provide an opportunity for Blue health insurers nationwide to expand into the Medicaid market today and to take advantage of the enormous growth expected in Medicaid over the next few years.”
Hartford-based Cigna also made a splash in October when it announced it would acquire Tennessee-based HealthSpring for $3.8 billion in cash, a deal aimed at jumpstarting its presence in the Medicare Advantage market. With the acquisition, Cigna will add more than 340,000 members enrolled in MA plans across 11 states and Washington, D.C., as well as another 800,000 enrolled in HealthSpring’s Medicare Part D prescription drug plans.
The deal is expected to nearly quadruple the revenue Cigna generates from its Medicare book of business. In 2010 it generated about $2 billion in revenue in that segment, or less than 10 percent of the company’s total revenue, while HealthSpring is on course to generate $5.4 billion in revenue this year.
A third deal that many in the industry are keeping a close eye on is the mid-year purchase of CareMore, a 54,000 member Medicare Advantage managed care organization operating 26 clinics in select markets in California, Arizona and Nevada.
“The Medicare market is particularly significant for WellPoint’s growth strategy,” said Angela F. Braly, chair, president and CEO of WellPoint. “We anticipate that more than one million Baby Boomers will age into Medicare every year between now and 2030 across our 14 Blue states.”