Humana is the latest top health insurer to gobble up a regional provider-owned health plan in a quest to boost flagging membership.
This time, the target is OSF HealthPlans, Peoria, Ill., which Humana said last week it intends to acquire in a $90.5 million deal.
OSF HealthPlans is a managed-care subsidiary of OSF Healthcare System, a private not-for-profit Catholic health system with six acute-care hospitals and one long-term-care facility in Illinois and Michigan, operated by the Sisters of the Third Order of St. Francis.
Launched in 1995 during the Clinton-era push for integrated delivery networks, OSF HealthPlans had about 10,000 members in its first year, and grew to more than 110,000 members in 2002, according to the company.
Although the plan has been successful financially, it has lost members in recent years, and currently has 78,000 enrollees, said spokesman James Farrell. UnitedHealth Group and Blue Cross and Blue Shield of Illinois are the two other major insurers in the region.
OSF HealthPlans had net income of $5.9 million and a margin of 2.2% in 2006, according to Allan Baumgarten, a healthcare consultant who tracks health plans. OSF declined to provide updated financial information.
The announcement comes after regional deals made by top insurers. In January, AmeriChoice, a unit of UnitedHealth Group, announced its intent to acquire Unison Health Plan, with 370,000 members in Delaware, New Jersey, Ohio, Pennsylvania, South Carolina and Tennessee. Last month, UnitedHealth closed on its controversial $2.8 billion acquisition of Las Vegas-based Sierra Health Services (March 3, p. 14). In November, Cigna Corp. said it intends to acquire Great-West Healthcare of Greenwood Village, Colo., for $1.5 billion, with 2.2 million members mostly in the West (Dec. 3, 2007, p. 8).
Several provider-owned managed-care units have changed hands in recent years. In late 2006, the University of Michigan Health System sold M-Care to Blue Cross and Blue Shield of Michigan. Last April, Novi, Mich.-based Trinity Health sold its managed-care unit to Priority Health, a Grand Rapids, Mich.-based HMO owned by three hospital systems.
Like OSF HealthPlans, major national insurers are struggling to keep membership up, faced with erosion of employer-sponsored coverage and government-sponsored program reimbursement, analysts said.
Last week, public insurers shares took a tumble after WellPoint, the largest insurer by membership, unexpectedly slashed its 2008 earnings forecast because of higher than expected medical costs, disappointing membership numbers and a worsening economy. The news came as a surprise because it was the first time since WellPoint went public in the 1990s that it missed an earnings projection, analysts said. Next, Humana cut its first-quarter forecast, based on higher than expected costs of its Medicare prescription-drug plan; Amerigroup Corp. said the Federal Reserves latest rate cut would hurt its bottom line; and Health Net said it might face similar trouble this year.