Aetna Inc. (AET:US), the third-biggest U.S. health plan, will have the resources for another sizable deal by 2014 after its $5.6 billion acquisition of Coventry Health Care Inc. (CVH:US) boosts cash reserves, Chief Executive Officer Mark Bertolini said.
Aetna said today it agreed to buy Coventry to add the smaller carrier’s 5 million private and government-backed members. While it’s out of the hunt for more deals of that size now, the Hartford, Connecticut-based insurer may look to grow in local markets where it wants new Medicare, Medicaid and commercial customers, Bertolini said in a telephone interview.
“There were lots of opportunities” during the acquisition search that led to today’s deal, Bertolini said. “Having that capital capability going into the post-2014 market where the potential for more consolidation can occur, where we can write more checks, is going to be an opportunity for us to do more consolidation.”
President Barack Obama’s health-care law is due to expand coverage to millions of Americans starting in 2014, through subsidies for private coverage and an expansion of the Medicaid program for the poor. Concern over the law’s effects means “the window is closing” for big deals like the Coventry purchase or last month’s $4.9 billion acquisition of Amerigroup Corp. (AGP:US) by WellPoint Inc. (WLP:US), Bertolini said.
“We’re getting close to where it’s going to be difficult for people to do any significant consolidation,” until at least 2014, he said. Until then, it won’t be clear how profitable acquisition targets are under the new law and buyers “are taking a big risk,” he said.
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