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Healthcare giant Aetna acquires a Medicare and Medicaid insurer

August 20, 2012|By Chad Terhune

Health insurance giant Aetna Inc., trying to capitalize on growing enrollment in Medicare and Medicaid, has agreed to acquire Coventry Health Care Inc. for about $5.7 billion in cash and stock.

The Hartford, Conn., company and nation's third-largest health insurer said the Coventry deal will allow it to add more than 5 million new members, many of them in faster-growing Medicare Advantage and Medicaid managed-care plans.

Other insurers have been striking similar deals as they seek to take advantage of Medicare's growth as more baby boomers retire and the federal healthcare law adds an estimated 15 million Americans to the Medicaid rolls starting in 2014.

Last month, WellPoint Inc. agreed to acquire Medicaid insurer Amerigroup Corp. for $4.9 billion.

Aetna said the acquisition should boost its share of revenue from government health plans to more than 30%, from 23% now. The deal is worth $7.3 billion including the assumption of debt, the companies said. Coventry, based in Bethesda, Md., also sells health plans to individuals and employers.

Mark Bertolini, Aetna's chief executive, said Coventry will help "increase our presence in the fast-growing government sector" and "accelerate our efforts to bring simpler, more affordable products to consumer insurance exchanges in 2014 and beyond."

Aetna shares were up $1.85, or nearly 5%, to $39.89 in midday trading Monday.

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