Bruce Japsen Senior Contributor May 20, 2021,08:00am EDT
Health insurance
companies and startups are looking to expand their already fast-growing
Medicare Advantage businesses through mergers and acquisitions.
Even as more seniors
flock to privatized Medicare known as Advantage and the health insurers that
sell these plans, companies are looking to build more scale by growing via
acquisition.
On Wednesday, Zing Health Enterprises signed a
definitive agreement to acquire Lasso Healthcare Insurance Co. in a move that
will expand the Chicago-based operator of Medicare Advantage plans nationally
into 32 new states.
And earlier this week, the newly publicly-traded health
insurance company Alignment Healthcare said
mergers and acquisitions are key to its strategy to enter new markets.
Alignment, which launched an initial public offering earlier this year, has
83,100 seniors in its Medicare Advantage plans in California, North Carolina
and Nevada and is looking to expand into new markets.
“While there are numerous
other growth avenues over the medium-term, our most immediately priorities are:
number one, grow our membership in our existing markets,” Alignment chief
executive officer John Kao told analysts on the company’s first quarter
earnings call earlier this week. “Number two: grow into new contiguous markets
in our existing states. And number three: establish in new beachhead markets in
new states, either organically or through M&A.”
Meanwhile, executives at
Zing say the addition of Lasso offers “a national footprint to reach diverse
communities with innovative Medicare Advantage health plans that lower the cost
of high-quality care.” Financial terms of Zing’s acquisition weren’t disclosed.
"Zing Health was
founded with the idea that incumbent Medicare Advantage insurers have neglected
certain segments of the senior population," Zing Health founder and chief
executive Dr. Eric Whitaker said in a statement. "Similarly, Lasso
Healthcare has developed MA products that benefit underserved rural
populations. Lasso's rural focus is a perfect complement to Zing's focus on
diverse populations in urban communities."
Larger players, too, are
telling Wall Street they plan to grow their Medicare Advantage businesses
through M&A. UnitedHealth Group, Humana, Cigna, Anthem and the Aetna unit
of CVS Health have seen their Medicare Advantage enrollment grow organically by
double-digit percentages in recent years.
Medicare Advantage plans
provide extra benefits and services to seniors, such as disease management and
nurse help hotlines, as well as some plans providing vision and dental
care.
But the Centers for
Medicare & Medicaid Services (CMS) has changed the rules in the last three
years for Medicare Advantage plans to allow them to cover more supplemental
health benefits in part to better coordinate care and make sure seniors get
lower cost benefits upfront before getting sick, which could cost taxpayers
more in the long run.
The program has been
bipartisan with Medicare Advantage plans flourishing under Presidents Obama and
Trump and now with the new Joe Biden White House, which is committed to
expanding healthcare benefits to all Americans, including seniors.
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