IBJNews

UnitedHealth to acquire Medicare insurer XLHealth

Back to TopCommentsE-mailPrintBookmark and Share

UnitedHealth Group Inc. said it will acquire XLHealth Corp., a provider of managed care for chronically ill Medicare members.

Indianapolis-based WellPoint Inc. had been considering a possible acquisition of the company, Bloomberg News reported Nov. 14.

Financial details for the all-cash transaction were not disclosed, but sources familiar with the deal said the company could be valued at $1.5 billion to $2 billion.

The purchase will be completed in the first half of 2012, and is expected to be accretive to UnitedHealth earnings per share, Minnetonka, Minn.-based UnitedHealth said Tuesday in a statement. XLHealth, owned by MatlinPatterson Global Advisers and based in Baltimore, estimates its 2012 sales will exceed $2 billion, the statement said.

Revenue from managed-care plans for Medicare, the U.S. health plan for the elderly and disabled, may rise by $10 billion by 2015 as baby boomers retire, analysts have said. The purchase of XLHealth, with 111,000 members, is the seventh since Jan. 1 involving companies that manage Medicare coverage.

“XLHealth represents an attractive acquisition opportunity for the large health insurance companies because of its focus on Medicare Advantage, which is poised for strong growth,” said Jason Gurda, an analyst at Leerink Swann in New York, prior to the deal being announced. Medicare Advantage managed care plans cover medical services, physician fees and hospitalizations.

Begun in 1997, XLHealth provides Medicare members with managed care for diabetes, heart disease and other chronic illnesses. UnitedHealth serves the most Medicare customers, with more than 7 million as of Sept. 30, company filings show. Humana, based in Louisville, is second with 4.3 million.

The purchase follows an agreement by Cigna Corp., the fifth-largest health insurer, to buy Healthspring Inc., another Medicare managed-care company, for $3.8 billion on Oct. 24.

Similar purchases in the area of managing the chronically ill include the takeover of CareMore Health Group by WellPoint in June and Nashville, Tenn.-based Inspiris by UnitedHealth Group Inc. at the beginning of the year.

The first baby boomers — people born from 1946 to 1964 — are turning 65 this year, a factor that’s likely to boost revenue for insurers who manage such plans by $10 billion in the next five years, Sarah James, an analyst at Wedbush Securities Inc. in Los Angeles, wrote in an Oct. 24 report.

James estimated as many as half of Medicare’s enrollees will sign up for managed care within five years as the ranks swell with a generation more familiar with preferred provider networks and health maintenance organizations.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. You are correct that Obamacare requires health insurance policies to include richer benefits and protects patients who get sick. That's what I was getting at when I wrote above, "That’s because Obamacare required insurers to take all customers, regardless of their health status, and also established a floor on how skimpy the benefits paid for by health plans could be." I think it's vital to know exactly how much the essential health benefits are costing over previous policies. Unless we know the cost of the law, we can't do a cost-benefit analysis. Taxes were raised in order to offset a 31% rise in health insurance premiums, an increase that paid for richer benefits. Are those richer benefits worth that much or not? That's the question we need to answer. This study at least gets us started on doing so.

  2. *5 employees per floor. Either way its ridiculous.

  3. Jim, thanks for always ready my stuff and providing thoughtful comments. I am sure that someone more familiar with research design and methods could take issue with Kowalski's study. I thought it was of considerable value, however, because so far we have been crediting Obamacare for all the gains in coverage and all price increases, neither of which is entirely fair. This is at least a rigorous attempt to sort things out. Maybe a quixotic attempt, but it's one of the first ones I've seen try to do it in a sophisticated way.

  4. In addition to rewriting history, the paper (or at least your summary of it) ignores that Obamacare policies now must provide "essential health benefits". Maybe Mr Wall has always been insured in a group plan but even group plans had holes you could drive a truck through, like the Colts defensive line last night. Individual plans were even worse. So, when you come up with a study that factors that in, let me know, otherwise the numbers are garbage.

  5. You guys are absolutely right: Cummins should build a massive 80-story high rise, and give each employee 5 floors. Or, I suppose they could always rent out the top floors if they wanted, since downtown office space is bursting at the seams (http://www.ibj.com/article?articleId=49481).

ADVERTISEMENT