Aetna (AET) Acquires bswift, Focuses on Private Exchanges
Health insurance prime, Aetna Inc. (AET) announced the completion of its acquisition of private health insurance exchange company, bswift.
Aetna announced in the first week of this month that it would acquire Chicago-based bswift for $400 million.
This move reflects the company’s strategy to expand its business in the private health insurance exchange. bswift will offer consumer-friendly technology to help in a customer’s shopping and administration.
bswift will continue to operate as a separate business within Aetna and will retain its existing leadership structure.
About Health Exchanges
Health insurance exchanges have been the hot topic over the past several months. What are these exchanges? How do these work? And why are these important? Let’s find out.
There are two types of exchanges – public health insurance exchange and private health insurance exchange. While the former was established by President Barack Obama as part of the Affordable Care Act, private exchanges are not part of this act. Public exchanges are run by the state or federal government, or by the state and federal government working together. On the other hand, private exchanges are managed by private sector companies, for example, by a health insurance company or a brokerage or consulting firm.
Public and private exchanges are likely to appeal to different audiences. Individuals without access to affordable health insurance are more likely to shop on a public exchange because of the subsidies, which are not available on private exchanges. Employers are more likely to send their employees to a private exchange as they provide a range of options to choose from providing employers their customized health solution.
Private Exchange Gaining Popularity
Since U.S. employers are mandated to provide health insurance coverage to their employees, the private health insurance exchange offers a solution for organizations trying to keep the cost of offering health benefits manageable. Employers can give their employees a set amount of money and then direct them toward a private exchange, wherefrom they can choose the best option.
Though the private exchange movement is relatively small at present, its nascent adoption phase allows Aetna and other players like CIGNA Corp. (CI) and UnitedHealth Group Inc. (UNH) to focus on growth opportunities it brings.
Private exchanges offer an easier way of purchasing health insurance, often at lower costs. These have an expansive choice of health plans and insurance packages, which most consumers today want, especially in the group health insurance market.
Private exchanges also make it easy to choose a plan that best fits a consumer’s needs. Health plans participating in a private exchange will also be able to reach more customers, and appeal to those planning to transition from a one-sized-fits-all model to customized health care solutions.
We therefore expect to hear more of such deals in the near future, as the players expand their private exchange programs.
Aetna carries a Zacks Rank # 3 (Hold). A better-ranked player in the same space is Centene Corp. (CNC). The stock carries a Zacks Rank # 2 (Buy).
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