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.