Aetna to purchase Coventry Health Care and extend reach into federal Medicaid dollars.
Government laws, rules and regulations routinely have more impact on business decisions than people may know. When faced with a challenge or opportunity created by a new law, astute businesses will begin to position their operations to take maximum advantage of the new regulatory landscape.
ACA to offer profits
While it was no secret the the Affordable Care Act would change the business strategy, tactics and operations of many insurance companies, we are starting to see more strategic acquisitions that may not have been expected. The most recent case involves proposed Aetna acquisition of Coventry Health Care.
Medicaid pays like a rigged slot machine
Significant in Aetna’s press release about their purchase of Coventry is their statement, “Coventry will increase our presence in Government business.” Coventry has a strong foothold in the managment of some states Medicaid managed care plans. Since the ACA will expand Medicaid to a larger portion of population with higher incomes, Aetna wants a piece of the pie. This is similar to Wellpoint’s acquisition of Amerigroup back in July.
Consolidation
The ACA is having the possible unintended consequence of creating a consolidation of regional health insurance plans under the umbrella of larger national companies. Both Aetna and Wellpoint are positioning their businesses to receive more government revenue, through Medicaid premium payments, than they ever had before.
Wall Street health care
An addendum, which was longer than the actual informational text, that I had not seen before attached to this sort of press release was titled “Important Information For Investors And Stockholders” along with “Cautionary Statement Regarding Forward-Looking Statements” At first I thought this was just a new perfunctory government statement that Aetna had to include. Then a Google search brought up Faruqi & Faruqi, LLP is Seeking More Cash for the Shareholders of Coventry Health Care, Inc. (CVH).
Follow the money
We all want to afford health insurance.
It appears that Aetna is covering their bases as Coventry is being investigated for potential breaches of fiduciary responsibility involving the Coventry’s Board’s conduct relating to the sale. In short, there are questions as to whether Coventry undervalued the proposed sale of their shares to Aetna. There is the possibility that Coventry could have fetched a higher per share price either through additional negotiations with Aetna or another insurance company all together.
Regardless of Wall Street machinations, the ACA is creating opportunity and profits for insurance companies in America. I am not totally sure the intent of the ACA was to enrich insurance companies with federal Medicaid dollars, but that looks like the scenario that is playing out.
