Aetna-Coventry nuptials: fewer suitors out there?
LOS ANGELES (MarketWatch) -- Will the merger of
A look at stock activity shows that investors seemed worried about just that: Shares of a few Medicaid specialists plunged to begin the trading week and gave the impression that all the great suitors already are saying their nuptials -- and a few might not even get within spitting distance of the church. Already this year,
Most notable on the prospective spinster list is
But Centene has yet to find a mate, and the merger of Aetna (AET) with Coventry (CVH) likely took another possible partner off the table for Centene, shares of which traded down more than 7% at one point. The shares were off more than 5% in recent action at $39.57.
"Centene and Molina may lose some premium post-the Amerigroup deal, as no clear buyers of these government payers exist," Stifel Nicolaus analyst Thomas Carroll said in a note to clients Monday.
Although virtually all insurers take some Medicaid business serving the indigent, Centene, Molina and WellCare specialize in the field, and prospective suitors may remain leery that this year's presidential and congressional elections may not turn out well for them. While the Obama law, often known as "Obamacare," expands the Medicaid program, that could be reversed if Republican challenger Mitt Romney is elected and he makes good on his vow to repeal the law.
Vouching for vouchers
The larger business for Aetna and Coventry is in the Medicare program for seniors, and the deal is expected to give Aetna, as the buyer, a larger Medicare "footprint" in the business. Meanwhile, both Obama and Romney are pledging to preserve Medicare, though Romney and running mate Rep. Paul Ryan (R., Wisc.) are looking to substitute straight government payouts with a voucher-style system.
"Actually, a voucher system works better for insurers. It's not so good for everyone else, but it's great for insurers," said Les Funtleyder, fund manager for Poliwogg LLC and health-care analyst.
But he added that a Romney-Ryan voucher system would not take effect for at least a decade, so the election outcome may have very little effect on a merged Aetna-Coventry network.
"It's kind of a non-factor, if you will," he said. Funtleyder contends there is some confusion over the fortunes of health insurers in light of the government health-insurance fight going on between Democrats and Republicans, which has led to lower valuations for companies -- and more mergers.
The big insurers left on the table, however, may not be in a position to make a deal.
"If you're concerned about Romney winning, that's probably not the place to be," he said.