Aetna buying Coventry, which manages some Medicaid care

Aetna will buy Coventry Health Care for about $5.6 billion as the third-largest health insurance company poises itself for more Medicare and Medicaid patients under the federal health-care reform law.

Coventry Cares is one of four managed care organizations that supervise care for Kentucky's Medicaid patients. But since being put in place last November, the company reports it has been beleaguered by shortfalls and has threatened to end many contracts with hospitals.

"It's a deal that almost had to happen," said thomas Carroll, a Stifel Nicolaus & Co. analyst in Baltimore. "For Aetna to really compete effectively amongst the other large national managed care companies, they have to do more in terms of gaining market share in the commercial business as well as getting a bigger foothold in Medicare and Medicaid, which are the growth areas in managed care over the next decade."

The health care law "seeks to add as many as 17 million patients under Medicaid, the insurance program for the poor, while individuals states have increasingly turned to insurers to help them manage existing programs at lower costs," reports the Bloomberg News. "Medicare managed-care plans are among the fastest-growing products for health insurers as Americans age." (Read more)