UnitedHealth Group to buy Medicare specialist XLHealth

MINNETONKA, Minn. ―  UnitedHealth Group Inc. plans to acquire privately held XLHealth Corp in the health insurance industry’s latest deal involving Medicare plans for the elderly.

XLHealth, which is owned by private equity firm MatlinPatterson, specializes in plans for Medicare recipients with special needs, including chronic illness, and those low-income beneficiaries who also receive Medicaid government coverage.

The parties did not disclose the deal price, but UnitedHealth said it expected to close the acquisition in the first half of next year and that it would add to earnings.

Bloomberg News, citing anonymous sources, previously reported that UnitedHealth, along with rivals WellPoint Inc and Aetna Inc , were weighing bids for XLHealth potentially valued at $1.5 billion to $2 billion.

XLHealth serves about 113,000 Medicare Advantage plan members in six U.S. states and is expanding into six more next year. It estimates its 2012 revenue will exceed $2 billion.

UnitedHealth is already one of the largest providers of Medicare Advantage plans, with 2.2 million members at the end of September. It expects total revenue to exceed $101 billion this year.

Medicare is an enticing market for U.S. health insurers, as the entry of the postwar baby boom generation into retirement looks to swell the ranks of privately run Medicare Advantage plans.

Such plans now account for 25 percent of Medicare enrollment, compared with 75 percent for government-run plans, but analysts expect that percentage to rise. Medicare beneficiaries can choose to receive their benefits through private health insurance plans.

Last month, Cigna Corp struck a deal to buy HealthSpring Inc for $3.8 billion to jump-start its business selling Medicare plans.

Humana buys MD Care to expand California presence

LOUISVILLE, Ky.― Health insurer Humana Inc. agreed to acquire privately held MD Care for an undisclosed amount on Friday to expand its Medicare plans for the elderly in California.

Humana, one of the largest Medicare plan providers, said it expects the deal to close in late 2011 and the acquisition is not expected to materially impact its 2011 earnings outlook.

MD Care, whose Medicare Advantage plan has about 15,000 members in Southern California, recorded revenue of $155 million in 2010, Humana said.

“We view the acquisition favorably as it provides Humana with another opportunity to expand its Medicare Advantage footprint, which should help it continue to leverage its infrastructure,” Oppenheimer & Co analyst Michael Wiederhorn wrote in a note.

Last month, Humana said it would acquire California-based Arcadian Management, which also specializes in Medicare Advantage plans, for an undisclosed sum.

Humana shares were down 0.28 percent at $76.06 on Friday on the New York Stock Exchange.