Now that the Affordable Health Care Act has been upheld by the U.S. Supreme Court, health insurance companies are settling in to brace themselves for the changes that will be coming their way soon, particularly with regards to Medicaid, the state-federal program that provides health insurance coverage to the needy and disabled. These changes include at least one new merger: Hartford, Connecticut-based health insurance company Aetna is announcing that it will purchase Coventry Health Care for $5.7 billion.
Under the terms of the deal, Aetna will pay $42.08 for each share of Coventry stock. This includes $27.30 in cash and a portion of its stock. The price represents a 20 percent premium on Coventry's Friday closing price of $34.94. The deal is valued at $7.3 billion, including debt from Coventry Health Care Inc., which is based in Bethesda, Maryland.
The acquisition is expected to boost Aetna's Medicare Advantage and Medicare prescription drug businesses, and grow its Medicaid business. Due to the Affordable Health Care Act, in 2014, millions of Americans unable to afford health insurance will get it through Medicaid as part of the law, which will also offer subsidies to help more people buy mandated private insurance coverage. To cope with the expansion, many states will be hiring insurers to offer Medicaid coverage to their residents.
According to Aetna, the purchase of Coventry will raise the percentage of revenue it draws from government business to 30 percent, from 23 percent.
Edited by
Rich Steeves
