Two big health insurers team up in acquisition [The Kansas City Star]

A planned acquisition of Coventry Health Care Inc. by fellow insurer Aetna Inc., announced Monday, will give Aetna access to more Medicaid and Medicare

business -- programs expected to grow under national health reform.

But what local consumers are likely to notice first is that the $5.7 billion deal will reduce by one the number of major health care insurance carriers in

the Kansas City market.

"In the local fully insured marketplace, especially for small groups, that brings us down to Blue Cross and Blue Shield, UnitedHealth, Humana and Aetna,"

said David Power, a broker with the Power Group in the Kansas City area. "We'll have one less option to show clients to compare plans and rates, and that

means less competition."

Mike Brewer, president of Lockton Benefit Group, said that in the local middle market, involving companies of up to 5,000 people covered, he'd add Cigna as a

competitor, but he agreed that reduced competition was among the first things that came to mind when he heard of the deal.

"Consolidation does tend to erode competition a little, but the upside may be Aetna having a little more muscle to work with in the marketplace," Brewer

said.

Aetna sent notes to its brokers that said, in part, "In the foreseeable future, it is business as usual -- nothing changes." The purchase is subject to

approval from Coventry shareholders and federal and state regulators.

Aetna is the nation's third-largest health insurer based on enrollment numbers, ranking it behind UnitedHealth Group and WellPoint nationally. In Missouri

and Kansas, the Blues have the largest premium share and will continue to be the biggest after the Aetna deal is done.

What's attractive to Aetna in the deal is Coventry's 932,000-strong Medicaid enrollment. Since the U.S. Supreme Court upheld the health care overhaul

legislation, millions more Americans are expected to become eligible to participate in the state- and federally funded program for persons identified as poor

and disabled.

Just since the court's decision, WellPoint, which offers Blue Cross and Blue Shield plans in 14 states, said it intended to acquire Amerigroup Corp. Industry

analysts expect more consolidations as insurers try to bolster their government business.

Aetna called the Coventry acquisition a "fabulous" deal, even if the November elections change the future of health reform.

Aetna also would gain Coventry's Medicare business at a time when the big, aging baby-boom generation is becoming eligible for that program. Coventry has

about 1.5 million people enrolled in its Medicare prescription drug coverage.

According to statistics supplied by the carriers, Aetna has more than 18 million medical policy members, nearly 13.6 million dental members, and more than

8.6 million pharmacy members. The acquisition would add Coventry's nearly 3.8 million medical members and nearly 1.5 million Medicare Part D members.

Aetna shares rose 5.3 percent in Monday trading to $40.06, and Coventry shares jumped about 20 percent to $41.86.