On Friday, UnitedHealthcare, a subsidiary of UnitedHealth Group (UNH), announced that it has completed the previously announced acquisition of northeast U.S. operations of Health Net Inc. (HNT) HMO (health maintenance organization) entities in Connecticut, New York and New Jersey and membership renewal rights for the Health Net Life health care business in the Northeast. The transaction, which has received all the regulatory approvals, is valued at approximately $510 million.
The acquisition will enhance UnitedHealth Group’s market share in the New York metropolitan area by adding of Health Net’s 578,000 members in the Tri-State Area. UnitedHealth already has a strong market presence in this region. UnitedHealth, the large-cap national insurer, currently has a network of 79,000 healthcare professionals, 200 hospitals and 61,000 pharmacies in the three states. The acquisition is expected to be accretive to the earnings soon. This will contribute approximately $2.7 billion to the revenues.
Health Net has considered shedding its Northeastern operations to concentrate on its core Western market. The acquisition will help Health Net’s members and customers to benefit from UnitedHealth’s broad product offering, diverse network and robust clinical programs.
After the closing of the acquisition, UnitedHealthcare and Health Net will work together so that members and health care professionals have full continuity of their coverage and payments during the time that the Health Net benefit policies remain in force under the existing Health Net contracts.
UnitedHealth Group is one of the most diversified of the listed managed care companies. With a broad product and service offering, the company targets the full spectrum of the population. UnitedHealth stands healthy from a balance sheet perspective.
However, the current U.S. recessionary economic environment has adversely impacted demand for certain of the company’s products and services. Its medical cost ratios have also been increasing. However, we believe that the recent acquisitions will poise the company to benefit from a positive turn in the economy.
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