On Monday, August 20, Aetna announced it has entered into a definitive agreement to acquire Coventry Health Care, Inc.
As you know, Coventry is a diversified managed health care company that offers a full portfolio of risk and fee-based products, including Medicare Advantage and Medicare Part D programs, Medicaid managed care plans, group and individual health insurance, coverage for specialty services such as workers’ compensation, and network rental services. The acquisition of Coventry will complement Aetna’s strategy to expand its competitive set of core and emerging businesses to meet the evolving needs of the people it serves.
Through the Coventry acquisition, Aetna will add nearly 4 million medical members and 1.5 million Medicare Part D members on a pro forma basis, and will build on its existing resources and capabilities. Coventry will increase presence in Government business. Coventry’s growing Individual Medicare Advantage business and leading Medicare Part D business will complement Aetna’s Group Medicare Advantage franchise.
Coventry has built a reputation for its intense local focus. Its highly efficient operating structure allows it to deliver the kind of affordable products needed to compete successfully in a consumer driven marketplace.
Coventry operates local health plans that serve 27 states, primarily in the Mid-Atlantic, Midwest, Mountain West and Southeast United States. Even in states where Aetna and Coventry both have business today, each carrier tends to focus on different areas within the state and each carrier’s products tend to be complementary and largely do not overlap. This complementary geographic focus will create more opportunities for Aetna to create growth and enhance product offerings. Coventry will increase Aetna’s medical membership in Florida and Pennsylvania, and will enhance presence in Missouri, Kansas, Georgia, Utah, and North Carolina. This acquisition also will open up some local areas where Aetna has not been strong, including Pittsburgh and St. Louis.
Coventry operates health plans under various names including: Altius Health Plans, Cambridge Life Insurance Company, Carelink Health Plans, Confident Care Health Plan, Inc., CoventryCares, Coventry Health, Coventry Health Care, Coventry Health and Life, Coventry Summit Health Plan, First Health, First Health Life and Health Insurance Company, Group Dental Service, HealthAmerica, HealthAssurance, HealthCare USA, MHNet, MHNet Life and Health Insurance Company, Preferred Health Systems, and WellPath.
Coventry’s local focus also has helped it develop strong hospital and physician relationships. These relationships will be critical in local geographies where Aetna wants to improve its network and introduce new Accountable Care Solutions model. Aetna also anticipates these providers will want to take advantage of its provider solutions technology suite (e.g. Medicity, iNexx, and ActiveHealth.)
Finally, the acquisition will support Aetna’s commitment to delivering competitively priced products and services. With Coventry, Aetna sees additional opportunities to find administrative cost savings, as well as network and medical management savings. Operating more efficiently will help to offer customers – particularly consumers in the new exchange marketplace – more affordable products and services.
The transaction is subject to customary closing conditions, including regulatory and other approvals, and Aetna anticipates completing the acquisition in the middle of 2013. Until that time there will be no changes in business protocols, including broker compensation, as a result of the acquisition.
Once the acquisition is completed, Aetna will have a larger capital base and stronger business profile that will enable us to deliver more competitive products and services.