Humana buys second Medicare Advantage plan to expand business

In another step toward enhancing its Medicare-based offerings, Humana (NYSE: HUM) has announced it is purchasing a Medicare Advantage plan for the second time in five months.

Humana reached a deal to buy MD Care, a California HMO that provides supplemental coverage to about 15,000 Medicare beneficiaries and recorded $155 million in revenue last year, according to the Associated Press. The insurer announced in August that it was acquiring Arcadian Management, another California-based HMO that operates Medicare Advantage plans.

"We view the acquisition favorably as it provides Humana with another opportunity to expand its Medicare Advantage footprint, which should help it continue to leverage its infrastructure," Oppenheimer & Co analyst Michael Wiederhorn wrote in a note, Reuters reports.

The purchases of MD Care and Arcadian Management, in addition to increasing its Medicare Advantage business, extend Humana's customer base into California. Although it has more than 4.3 million Medicare members throughout the country, only about 5 percent of Humana members currently live in California, reports Fox Business.

"As Humana continues growing its Medicare business in the western U.S., MD Care offers an opportunity to expand our Medicare footprint and the suite of products and services we offer in California," said Thomas Liston, Humana's senior vice president of senior products, adding that the insurer is "committed to continued growth in California."

The deal is expected to close in late 2011, and Humana doesn't expect it to materially affect its 2011 earnings outlook, according to Reuters.

To learn more:
- read the Associated Press article
- see the Reuters article
- check out the Fox Business article

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