Aetna Health Insurance Purchases Coventry Health in Multi-Billion Dollar Deal

Aetna Health Insurance

Aetna health insurance plans to purchase Coventry Health Care in a multi-billion dollar deal, according to an announcement from the company this week. The purchase is expected to help the insurer establish itself as a major player among companies that offer government-backed programs like Medicaid and Medicare.

Aetna Health Insurance Pays $5.7 Billion for Coventry Health

Aetna Health Insurance shared on Monday that it is planning an acquisition of the company Coventry Health Care for about $5.7 billion in both cash and stock.

Under the terms of the deal, the insurance company will pay about $42.08 a share, which is about 20 percent higher than Coventry’s closing price on Friday. About two-thirds of this share price is expected to be paid in cash.

Aetna is the nation’s third-largest health insurance company based on enrollment, trailing WellPoint Inc. and UnitedHealth Group Inc.

Coventry Health Care, based in Bethesda, MD, while a smaller insurance company, offers a variety of insurance services, including government-finance programs like Medicaid and Medicare, and earned $543.1 million last year on revenue of $12.2 billion.

Aetna’s Acquisition of the Company Expands Medicaid Prospects

Aetna’s acquisition of the company is expected to boost the Aetna Health Insurance’s profile, particularly in the areas of Medicaid and Medicare.

Some insurance companies are pushing to get into the arena of government-backed insurance before 2014 when 60 million more people are expected to be covered by Medicaid. States hire insurance companies to offer Medicaid coverage to their residents, so companies like Aetna could profit well from the business.

With Medicaid and Medicare Advantage alone, the deal is expected to increase Aetna’s revenue by 7 percent. Adding the Coventry Heath Care purchase to its recent acquisition of Genworth Financial’s Medicare supplement business (which provides supplemental coverage to people on Medicare) is expected to help the company boost its income significantly.