M&A in health insurance sector projected to increase

Merger and acquisition activity is expected to grow in the near term, according to Atlantic Information Service's Health Plan Week.

An increase in health plans acquiring smaller providers and issuers, as well as IT and data analytics firms; the viability of the insurance industry in the post-healthcare reform era; and the desire by carriers to set long-term strategies are all factors industry observers say will lead to increased M&A activity.

"Last year we saw 22 announced deals in the managed care sector, and already this year we have 10 announcements of deals between insurance companies," Lisa Phillips, editor of health care M&A news for Irving Levin Associates, told Health Plan Week. "It looks like activity is picking up for 2015."

In addition to mergers between carriers, one of the dynamics impacting the private sector is the price that people are willing to pay for managed care plans, data analytics companies and healthcare IT services, according to Bill Baker, a partner with KPMG. The industry is at a high valuation peak, leading many more companies to consider such transactions.

Additionally, the trend of providers offering their own health insurance products has spurred M&A activity recently.

"Every health system over $1 billion or $2 billion in revenue, I can tell you with an unbelievably high degree of confidence those guys have a group of people in that health system trying to figure out how they are going to roll out a health plan," Mr. Baker told Health Plan Week.

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