Small plans increasingly sought for acquisition

April 1, 2012

Consolidation efforts have increased nationwide as large insurance companies concentrate on Medicare and Medicaid business.

NATIONAL REPORTS-Consolidation efforts have increased nationwide as large insurance companies concentrate on Medicare and Medicaid business.

UnitedHealthcare recently acquired two Florida-based Medicare and Medicaid plans: Preferred Care Partners and Medica Healthcare Plans. According to a company statement, UnitedHealthcare will acquire approximately 85,000 Medicare Advantage members and 12,200 Medicaid members as a result of the separate transactions.

Industry experts expect to see more mergers take place as the reform process pushes forward.

Steve Arbaugh, CEO and managing principal of ATTAC Consulting Group, agrees that there will likely be more consolidation, particularly for plans looking at competitive positioning against the big players in their markets.

"It takes a lot of money to grow a plan, and sometimes it's more expedient to enter a market as opposed to growing it organically," Arbaugh says.

He says plans must evaluate where they are today and prepare for what the environment is going to look like in a couple of years.

According to Hall, large, for-profit insurers are trying to become even larger in order to use their scale and expertise to lower costs as they enter a market. Ultimately, one goal is to have a presence in the key market segments.

Because of the expected explosion of growth in Medicaid enrollment under the Patient Protection and Affordable Care Act, Hall says that he expects to see additional consolidation.

"Medicaid is going to benefit from more management-even if it's with a light touch," Hall says. "The same thing will be true for Medicare after there's a little more solidification on what it will look like."

Right now, there is little consolidation among employer-sponsored plans because employers don't know what to expect in 2014. That said, Hall predicts there will be a similar consolidation process as insurers design exchange products that do well with consumers.