In early August, Humana purchased Harris, Rothenberg International, a private company providing employee assistance programs, or EAPs. Considering that the EAP market is so consolidated, observers say, the acquisition may be more about staying competitive than generating new revenue.
Humana started eying an EAP company as it "was looking into the next evolution," said Sean Slovenski, Humana's president of health and productivity solutions. New York-based Harris, Rothenberg International (HRI) was considered as "the premiere group," providing EAPs to several Fortune 500 companies, notably in the financial industry, covering about 5.5 million people in the U.S. and about 70,000 internationally.
"That level of experience is important to us," Slovenski said.
With HRI's employee wellness and EAP services, Slovenski said Humana will be offering those alongside health insurance plans. "We'll be building it into our sales suite."
HRI, which did not respond to requests for comment, is a mid-size EAP provider, and its acquisition leaves only a few independent EAP companies left, like the world's largest, ComPhysch, said Richard Weiss, a business professor at the University of Delaware.
In 2009, Aetna scooped up Horizon Behavioral Services for $70 million, then the third-largest domestic provider of EAP services, and UnitedHealth Group's wellness unit bought U.K.-based PPC Worldwide, an EAP provider with a large international base, on undisclosed terms. Humana wouldn't say how much it paid for HRI.
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While it's not clear how much is spent on EAP services in the U.S., Weiss estimates that employers with EAPs spend roughly $1.50 per month per employee, with most EAP services packaged with insurance and other benefit plans.
Humana's HRI buy comes as insurers are diversifying their business in the face of tighter profit margins. HRI's current client base could potentially offer new customers for Humana's insurance products.
Humana's Slovenski said the company wants to use EAPs as a way to improve the health and wellness of its members.
"A lot of the issues that drive people to be not too productive in life can really stress you out," he said, "say for people who are overstressed and overweight," and engage in emotional over-eating. With EAPs, you can treat the root of the problem."
Weiss, the University of Delaware professor, thinks insurers are buying up EAP companies more as a way to stay competitive with each other in the plans they're offering employers, since EAPs aren't necessarily very expensive.
"I doubt that it's a huge revenue increase for them. I think it helps them keep market share," he said.
Dale Masi, a Boston-based consultant who teaches an online EAP certificate program at Catholic University, said the EAP market is growing most internationally, especially in China's new middle class industries. In the U.S., the market is pretty full, said Masi, although there may be an opportunity with the federal government, which is likely the largest domestic EAP consumer.
It's not clear if HRI has any government contracts, although they're on Humana's radar, said Slovenski. "Just like any other EAP vendor, we're knocking on the door."