This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Romney, as President, Would Upend Billion-Dollar Insurance Deals

NEW YORK ( TheStreet) -- Mitt Romney's campaign pledge to repeal Obamacare would be unhealthy for Aetna (AET - Get Report).

The health-insurance company said Monday it is paying $5.7 billion to acquire Coventry (CVH).

Obamacare, which would make 16 million to 20 million new Americans eligible to enroll in Medicaid, is the growth Aetna is chasing through its deal with Coventry.

Companies like Aetna and Cigna -- which profit from the three major health-care segments of commercial health insurance, Medicare and Medicaid -- have seen a slowdown in the latter two segments after the financial crisis forced businesses to lay off millions of employees, which reduced the number of commercial health insurance customers.

"Their state of affairs at the time was a sluggish economy where employers were laying off employees, which meant that their membership was declining," said David Windley, a health-care analyst at Jefferies. "Their growth opportunity in commercial was limited and, to the extent that there was a growth opportunity, it was deferred down the road to when they would expect to see an economic recovery."

Romney's criticism of Obamacare is one of his cornerstone campaign platforms.

The former Massachusetts governor's promise, if elected president, is to issue an executive order to distribute Obamacare waivers to all 50 states and then work with Congress for a full repeal.

A repeal of Obamacare would strike down the strategic rationale behind the Aetna and Coventry transaction, leaving larger companies like Aetna, Coventry and Cigna (CI - Get Report) facing stagnant commercial growth due to a still-lethargic U.S. economy.

After the Patient Protection and Affordable Care Act passed in 2010, health-care companies saw government entitlement programs Medicare and Medicaid as growth sectors for the industry.

Cigna, which had been looking to increase its Medicare footprint, acquired HealthSpring in October 2011. The deal added $340,000 Medicare Advantage customers and another 800,000 tied into HealthSpring's Medicare prescription drug business.

In July, Wellpoint (WLP) announced a $4.9 billion acquisition of managed-care company Amerigroup (AGP), which had 4.5 million customers of state-sponsored health-care programs.

Aetna's Coventry acquisition would immediately add 5 million members, with 250,000 on Medicare and 930,000 on Medicaid, according toBloomberg.

"Integrating Coventry into Aetna will complement our strategy to expand our core insurance business, increase our presence in the fast-growing government sector and expand our relationships with providers in local geographies," Aetna CEO Mark T. Bertolini said in a statement.

Romney's pledge, if elected, to deep-six Obamacare would face an uphill battle in Congress. The House has failed to repeal Obamacare more than 30 times in 2012.

But if Romney were successful, Aetna and other insurers that have made bets on growth from Obamacare would stand to lose much more than members.

-- Written by Joe Deaux in New York.

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AET $108.82 -0.07%
CI $130.66 0.07%
AAPL $130.28 0.47%
FB $81.53 -1.07%
GOOG $565.06 3.30%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs