Mergers & Acquisitions

UnitedHealth Group will sell its Brazilian subsidiary, Amil, the integrated managed care giant on Dec. 29 revealed in a filing with the Securities and Exchange Commission (SEC). Other publicly traded insurers have similarly divested international health insurance divisions in recent years after a notable trend of international expansion during the early 2010s.

UnitedHealth said in the SEC filing that its earnings guidance remains unchanged, and it added that the deal is expected to incur a $7 billion charge “which will be excluded from adjusted earnings, the majority of which is non-cash and due to the cumulative impact of foreign currency translation losses.”

Elevance Health, Inc. has agreed to acquire Paragon Healthcare, a company that provides infusion services to patients. Elevance announced the pending transaction on Jan. 4 and said it expects the deal to close in the first half of this year. The companies did not disclose financial details, but Axios reported Elevance will pay more than $1 billion for Paragon, which operates in Alabama, Colorado, Florida, Georgia, Missouri, Oklahoma, Tennessee and Texas. If the deal closes, Paragon will become part of CarelonRx, Elevance’s pharmacy services segment.

The Cigna Group is in “advanced talks” to sell its Medicare Advantage business to Health Care Service Corp. (HCSC) for between $3 billion and $4 billion, according to a Jan. 3 Wall Street Journal article. The report comes shortly after Bloomberg cited anonymous sources saying HCSC and Elevance Health were interested in acquiring Cigna’s Medicare business, a segment the company entered in 2012 through its acquisition of HealthSpring. Cigna has struggled to compete in Medicare with market leaders such as UnitedHealth Group and Humana Inc., and it has just 580,000 MA lives, according to AIS’s Directory of Health Plans. Earlier last month, the WSJ reported that discussions about a potential transaction between Cigna and Humana had fizzled.

The Cigna Group may sell its Medicare Advantage business to Health Care Service Corp. for between $3 billion and $4 billion, according to the Wall Street Journal. After Cigna and Humana Inc. reportedly abandoned their rumored talks of combining, Bloomberg last month reported that HCSC and Elevance Health, Inc. were competing to buy Cigna’s MA segment. Sources close to the matter said Cigna is in “exclusive talks” with HCSC, which operates Blue Cross and Blue Shield plans in five states, the Wall Street Journal reported on Jan. 3.

After securing an amended credit agreement with JP Morgan, Bright Health Group, Inc. on Jan 1. finalized the previously announced sale of its Medicare Advantage assets to Molina Healthcare, Inc. The technology-driven startup on Dec. 29 said an amendment to its credit facility with JP Morgan would reduce the final repayment amount by roughly $30 million to approximately $298 million. With the close of the MA sale — which involves the California plans Brand New Day and Central Health Plan — the company has eliminated its secured debt and will use the remaining proceeds of the sale to “provide a solid foundation” for advancing its NeueHealth accountable care organization business, according to a Jan. 2 press release. Molina in December said it would buy the MA plans for approximately $425 million, down from the originally announced $510 million; analysts speculated the discount had to do with underperformance in Bright’s MA business due to heightened Medicare utilization trends in 2023.The deal nets Molina 121,863 MA members, boosting its membership by 115%, according to AIS’s Directory of Health Plans.

While deal talks between The Cigna Group and Humana Inc. have reportedly fizzled, Cigna’s desire to sell its Medicare Advantage business is apparently still alive and well. Health Care Service Corp. and Elevance Health, Inc., are the two contenders for Cigna’s MA segment, which could fetch more than $3 billion, according to a report from Bloomberg, citing anonymous sources.

Industry observers say they aren’t surprised that Cigna is still trying to offload its MA book of business, even if doing so is no longer necessary to fend off antitrust scrutiny associated with a Cigna-Humana megamerger. What’s less clear, they say, is what Cigna’s growth strategy would then look like.

After merger talks fizzled in September, Elevance Health, Inc.’s agreement to acquire Blue Cross and Blue Shield of Louisiana is back on, according to the New Orleans Times-Picayune. The companies had put the $2.5 billion deal on hold due to rising opposition, but the Times-Picayune reported the companies filed a new application on Dec. 14 with the Louisiana Dept. of Insurance. The structure of the deal is largely unchanged, although the companies agreed to expand the board of directors for the Accelerate Louisiana Initiative, a nonprofit foundation. The companies expect the transaction will close during the first quarter of 2024.

More than 19 million people have signed up for coverage via Affordable Care Act exchange plans for next year, according to the most recent data from CMS. The enrollment figures are as of Dec. 15 for the 32 states that use the HealthCare.gov website and through Dec. 9 for the 18 states and Washington. D.C., that have state-based marketplaces. More than 15.3 million had signed up for plans in states using the HealthCare.gov platform, a 33% increase from last year. In addition, more than 745,000 people signed up on Dec. 15, the largest single-day record since HealthCare.gov launched on Oct. 1, 2013.

Bright Health Group, Inc. suffered another blow on Dec. 13, when the foundering startup insurer revealed that Molina Healthcare, Inc. will pay less than originally planned for Bright’s California Medicare Advantage business. Molina now plans to pay $425 million for the California business, instead of the originally announced $510 million — a development that could complicate the ongoing liquidation of several Bright subsidiaries and its Affordable Care Act risk adjustment repayment agreement with CMS.

According to a Molina press release from Dec. 18, “the purchase price for the transaction, net of certain tax benefits, is reduced from the previously announced $510 million to approximately $425 million, and now represents 23% of expected 2023 premium revenue of $1.8 billion.” Molina expects the deal, which it predicts will close “on or about January 1, 2024,” will add $1.00 per share “to new store embedded earnings” in the coming year.

In the midst of uncertainty around the U.S. economy, dealmaking in the life sciences industry held steady in the third quarter, with 194 deals unveiled or closed. That’s one of the findings from KPMG’s third-quarter 2023 report on life sciences merger and acquisition (M&A) activity. Dealmaking varied based on the actual sector, but the industry may be poised to ramp up activity as the year comes to a close, according to one industry expert.

Third-quarter 2023 was the fifth in a row that the industry’s major sectors — medical devices, pharmaceutical services, and diagnostic and lab services — remained steady, notes Kristin Pothier, leader of KPMG’s Global and US Healthcare & Life Sciences Deal Advisory & Strategy.

The Dept. of Justice on Dec. 15 filed a motion to transfer or dismiss Humana Inc.’s case against the federal government and its use of extrapolation in Risk Adjustment Data Validation (RADV) audits of Medicare Advantage insurers. After CMS in January finalized plans to begin extrapolating RADV audit findings in recovering improper payments starting with payment year 2018, Humana on Sept. 1 filed a lawsuit asking the U.S. District Court for the Northern District of Texas to vacate the rule and therefore stop CMS from applying its new audit policy. By excluding a “fee-for-service adjuster” that the agency had once promised would be used in the audits, the RADV audits “do not observe any actuarial standards at all,” the MA insurer argued in Humana Inc. et al v. Becerra et al (No. 4:23-cv-909-O). In its response filed in the Fort Worth division of the District Court, HHS argued that Humana hasn’t been harmed because CMS has not begun any audits under the challenged rule. Moreover, there is no certainty that Humana will be subject to audits under the new rule because CMS hasn’t “chosen the contracts to be audited under the rule for any payment year, nor selected a statistical sampling and extrapolation methodology for any such audits,” stated the response, which was obtained and posted by STAT.

Call it the blockbuster deal that never was. The Wall Street Journal reported on Dec. 10 that The Cigna Group abandoned merger talks with Humana Inc., ending a multiweek stir over a report from the same publication that the companies were discussing a deal that would have created a $140 billion megainsurer. With the dust now settling, analysts and industry observers are speculating about what comes next for the two firms — with some suggesting that Cigna may eventually wind up back at the negotiating table.

Neither Cigna nor Humana ever officially confirmed their reported deal discussions. But on the same day that the WSJ reported Cigna was abandoning its pursuit of Humana, Cigna said its board of directors had approved an additional $10 billion in share repurchases. Cigna CEO David Cordani also issued a telling statement hinting at what might have derailed the merger talks — per the WSJ, the firms couldn’t agree on financial terms — and addressing the company’s merger and acquisition (M&A) strategy.

During their Dec. 12 investor day, Centene Corp. executives promised 12% to 15% in annual earnings growth and declared victory in their multiyear value creation and cost-cutting plan. Wall Street analysts responded warmly to the firm’s presentation, which featured a bold plan to grow Affordable Care Act marketplace enrollment by courting small businesses.

That plan would leverage Individual Coverage Health Reimbursement Arrangements (ICHRAs) to exploit what CEO Sarah London called a “long-term disruption opportunity” in the small-business health insurance market. Centene is the first major carrier to promise long-term, substantive growth in ICHRAs. The long-term growth prospects of ICHRAs, which allow employers and employees to buy marketplace plans, are far from clear.