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Oct
24

Two big transactions; implications for work comp part 1

Yesterday we learned Concentra and USHealthwork are combining, and Aetna is selling it’s life and disability business.

Both deals have implications for workers’ comp.

Aetna

The Hartford is buying the life and disability unit for just under $1.5 billion. While this may seem like a lot to you and me, it isn’t to Aetna…the giant healthcare company’s pretax earnings for a three-month period were $1.8 billion this year.

Folks have been talking about a potential sale of the Coventry work comp business for what seems like years now, with more rumors coming over the last couple of months. I don’t see it. 

If a $1.5 billion transaction is “immaterial to 2017 earnings…[and] slightly dilutive for next year” then the work comp business may be even less significant to Mother Aetna. Sure, work comp is likely a more profitable business than the group benefits unit, but it would have to be an order of magnitude bigger to make it worth the time and attention of Aetna’s senior management.

Think of it from management’s perspective; their healthcare business is being whipsawed by the clustermess in DC, they don’t know from day to day what their Medicaid strategy should be, and the President’s talk about “giveaways” to insurance companies is anxiety-inducing indeed.

In light of all this, there’s just no bandwidth to think about selling a relatively tiny business that’s generating some reasonable cash flow.

Tomorrow, Concentra-US Healthworks.

What does this mean for you?

Remember, work comp is a very small business compared to the P&C world and healthcare.

Those businesses affect work comp far more than work comp affects them.


Joe Paduda is the principal of Health Strategy Associates

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A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

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