With Deal to Buy Trustmark, HCSC Continues Diversification Push

by Tim Casey

 

Health Care Service Corp. (HCSC) recently agreed to acquire Trustmark Health Benefits, a third-partner administrator (TPA) of health benefits. The pending deal continues HCSC’s expansion from its roots as primarily a traditional commercial insurer to other areas like TPAs and Medicare, and the diversification push is likely to continue, according to health insurance industry analysts who spoke with AIS Health.    HCSC is focusing on self-funded segment  In May 2021, HCSC led a $280 million Series F funding round in Collective Health, a technology-focused TPA for self-funded employers. At the start of this year, HCSC began offering Collective Health’s digital platform and services to self-funded customers in Illinois and Texas.   “I think what this shows is that HCSC really has built a formidable, national TPA business,” Ari Gottlieb, principal at consulting firm A2 Strategy Group, tells AIS Health. “They’re piecing together the platform and the market-facing distribution and customer base that demonstrates that they’re really going to want to compete more aggressively in the self-funded space nationally.”   The transaction is scheduled to be finalized by the end of the year, subject to customary closing conditions. It comes as the number of companies offering self-insured plans increases, and as those firms are looking for aid from outside sources like TPAs.   Other insurers are acquiring TPAs, too  Doniella Pliss, a director at credit rating firm A.M. Best, explains that health insurers usually earn higher profits by serving fully funded clients because in those arrangements the insurers are accepting the risk of paying health care expenses and handling administrative duties. But as the self-insured segment grows, insurers are increasingly offering those plans to clients and designing benefits based on what companies want, according to Pliss.   Pliss would not comment on HCSC or its pending Trustmark Health Benefits deal. But she says that health insurers in general are “being very active” when it comes to buying TPAs to expand their self-insured business.    “These TPAs have accumulated a lot of experience in serving these [self-funded] clients, which insurance companies often didn’t have and don’t have,” Pliss tells AIS Health. “By acquiring the capabilities of these TPAs, they’re improving their ability to manage the self-funded clients.”  Michael Abrams, managing partner of Numerof & Associates, says HCSC’s pending acquisition of Trustmark Health Benefits and its Collective Health investment are ways for the insurer to offer clients customized plans as opposed to traditional, one-size-fits-all designs.   “The movement towards more customized plans reflects a desire to have a plan that actually is designed not just to pay fee-for-service as most plans do but is designed to actually drive down the cost of care.”

 

From Health Plan Weekly

 

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