CIGNA Corp.
(
CI
) announced its plans to purchase selected Medicare Advantage
("MA") plans in the state of Texas and Arkansas. Cigna will buy the
plans in three markets - Amarillo, Longview-Marshall and Texarkana
- from Humana.
The transaction is subject to regulatory approvals and is
expected to be complete by the end of 2012.
Humana got regulatory approval to buy Arcadian only on the
condition that the former will divest Arcadian's Medicare Advantage
business in 51 counties in five states, namely, Arizona, Arkansas,
Louisiana, Oklahoma and Texas. These divestitures were aimed at
preventing monopoly in the states where the merging entities were
the chief rivals before the acquisition, and hence, a union will
virtually leave no competition.
While Cigna has bought Texas and Arkansas MA plans, other
contenders for the remaining plans may be
WellPoint Inc.
(
WLP
) and
UnitedHealth Group Inc.
(
UNH
).
From the beginning of 2013, nearly 3,500 members, who will be
affected by the divestiture, will be served by HealthSpring's
robust physician engagement model. HealthSpring is a subsidiary of
Cigna, which works closely with doctors and provides quality health
care to its members.
Cigna acquired HealthSpring in January this year to enter into
the promising Seniors and Medicare Advantage market, a line of
business in which it was virtually non-existent. The acquisition of
more MA plans will strengthen Cigna's presence in the MA
market.
While HealthSpring already has a presence in the state of Texas,
this acquisition will enable the company to enter Arkansas and its
counties of Columbia, Hempstead, Howard, Lafayette, Little River,
Miller, Nevada and Sevier.
In a separate development, Cigna issued a statement after the
Supreme Court ruling on the Health Care Reform that upheld the
individual mandate requiring all Americans to get an insurance
cover and pay a penalty in case of non-compliance. Cigna said that
it would strive to provide quality services to Americans by
developing innovative customer rewards, industry-leading health and
wellness initiatives, and Accountable Care Organizations. Cigna has
also rolled out a 24x7 customer helpline to respond to customers
queries regarding the Supreme Court ruling.
Cigna currently retains a Zacks # 2 Rank, which translates into
a short-term Buy rating. We, however, maintain our long-term
Neutral recommendation on its shares.
CIGNA CORP (CI): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis
Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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