Commercial health insurers in Europe have prospered by finding ways to participate in government health insurance programs or complement the government programs.
Many large commercial health insurers in the United States seem to be preparing for the possibility that the Patient Protection and Affordable Care Act of 2010 (PPACA) will reshape the U.S. health care system along European lines by ramping up their own Medicaid, Medicare and supplement insurance products units.
Cigna Corp., Bloomfield, Conn. (NYSE:CI), took a step in that direction earlier this month when it announced plans to acquire the Austin, Texas-based Great American Supplemental Benefits business from American Financial Group Inc.(NYSE:AFG), Cincinnati, for about $295 million in cash.
Cigna and American Financial hope to get the approvals they need to close on the deal sometime this summer or fall.
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Cigna jumped into the Medicare Advantage market in January by acquiring HealthSpring Inc., Nashville, Tenn., for $3.8 billion. HealthSpring is known for its finesse at running Medicare Advantage provider networks.
Great American sells a number of senior markets products, including Medicare supplement, or Medigap, insurance. It also sells individual critical illness insurance, cancer insurance and accidental injury insurance.
The Great American Medigap and critical illness businesses generated about $34 million in operating income in 2011 on $325 million in revenue, $191 million in reserves and $400 million in assets.
American Financial decided to de-emphasize the sale of supplemental health products in the third quarter of 2010, and it sold a career agency unit that had helped distribute the products in the fourth quarter of 2010.
American Financial is keeping a unit at the Great American Supplemental Benefits business that had been selling long-term care insurance (LTCI).
American Financial says it is making the deal to focus more narrowly on its core property-casualty operations and get cash it can use to buy back company stock.