The health insurance industry's latest overhaul to shift away from paying for volume to paying for value may be behind Aetna's rumored deal to acquire either Cigna or Humana, reported Forbes.
Earlier this year, the Department of Health and Human Services announced plans to fundamentally reform how it pays providers for treating Medicare patients in the coming years. In light of the tradition to value-based care, Aetna CEO Mark Bertolini told analysts and investors on a call to discuss first quarter earnings recently that "value based contracting now represents approximately 30 percent of Aetna's medical spend with a goal to achieve 75 percent by the end of the decade," noted Forbes.
Bertolini also mentioned Aetna's 62 accountable care organization contracts and the nearly 1 million members in medical homes, a 38 percent growth since the beginning of 2014.
But the transition away from fee-for-service payment methods comes at a price, as it's expensive to implement new information systems to ensure patients receive quality care. Even though health plans receive billions in revenue thanks to newly insured Americans under the Affordable Care Act, they're forced to invest those billions to help their providers coordinate care and maintain its affordability, Forbes pointed out.
That's why Humana's booming Medicare business makes it an attractive acquisition target for Aetna, which focuses more on employer-sponsored health plans which have less unit growth potential than Medicare or Medicaid plans. However, analysts believe Aetna may have to dish out a hefty premium for Humana's business in order to remain competitive in the market, according to BenefitsPro.
Both insurers closed strongly last week. Aetna stock finished up $1.26 Friday to close at $112.74, while Humana's share rose another $1.65 to close at $175.90, noted BenefitsPro.