UnitedHealth Group Inc. plans to buy Medicare Advantage plan provider XL Health Corp., becoming the latest health insurer to expand its presence in a market expected to grow rapidly due to aging baby boomers.
Terms of the deal were not disclosed.
UnitedHealth, based in Minnetonka, Minn., said Tuesday that XL Health serves 113,000 Medicare Advantage customers in six states. The Baltimore-based company will add six more states next year, when it estimates that its revenues will exceed $2 billion.
Medicare Advantage plans are privately run versions of the government's Medicare insurance program for the elderly and disabled. Subsidized by the government, the plans offer basic Medicare coverage topped with extras like vision or dental coverage or premiums lower than standard Medicare rates.
Nearly 12 million people were enrolled in these plans as of last March, according to the non-profit Kaiser Family Foundation. But insurance executives expect the market to grow as baby boomers — the generation of Americans born in the years after World War II ended — reach age 65 and become eligible for coverage.
UnitedHealth had 2.2 million Medicare Advantage members as of Sept. 30 and is already the largest provider of these plans. The insurer also has about 3.5 million members enrolled in Medicaid, the state-federal program that provides coverage for the needy, aged, blind and disabled.
The company said the acquisition of Baltimore-based XL Health will help it improve service to enrollees with chronic illness and those who are eligible for both Medicare and Medicaid.
These so-called dual eligible, special needs members are the most profitable segment of Medicare Advantage for health insurers, BMO Capital analyst Dave Shove said in a research note. He expects the deal to start adding to UnitedHealth earnings immediately.
Several other health insurers have been buying Medicare Advantage businesses.
In October, Cigna Corp. said it would pay $3.8 billion for HealthSpring Inc., which has about 340,000 Medicare Advantage customers in 11 states. WellPoint Inc. completed the acquisition of CareMore Health Group, which provides Medicare Advantage coverage and coordinated care for about 54,000 people, in August.
UnitedHealth expects its all-cash deal for XL Health to close in the first half of 2012.
The company's shares rose 31 cents to $44.75 in Tuesday morning trading.