Aetna Buys Coventry Health Care for $5.7 Billion

Aetna,

the health-care giant, has come to terms to buy Coventry Health Care

for $5.7 billion. The 20 percent premium for Coventry has early morning shares trading north of $40. Aetna, in the meantime is trading down two percent in pre-market trading. Aetna's buyout comes a week after the announcement by WellPoint

to buy Amerigroup

for $4.46 billion. It appears the health care sector will continue to consolidate as companies try to expand their health plan coverage to include Medicare and Medicaid programs.

reported, Aetna would pay $42.08 a share for Coventry. The breakdown of the deal is said to be 65 percent cash and 35 percent stock. The acquisition is said to increase Aetna's share of revenue from its government business by seven percent. Aetna, the third largest U.S. healthcare provider, predominately manages commercial health insurance, but is attempting to capitalize on Obama's health-care reform law. Medicaid programs are set to expand to state coverage for low income citizens beginning in 2014. Last year, Cigna

bought HealthSpring

for $3.8 billion to take advantage of its Medicare and Medicaid divisions. In the merger, Cigna paid a 37 percent premium for HealthSpring last October. For investors, look for continued consolidation of government Medicare and Medicaid insurance providers.

currently receives three-quarters of its revenue from Medicare. “The company's enrollment is growing as the U.S. population ages and the new members are using more medical care. The increase in doctor visits may have come because people put off care before joining Medicare due to the weak economy”, said Humana's Executive Vice President James Murray. UnitedHealth Group,

is the largest U.S. single healthcare provider and may be the next insurer looking to cash in on the Medicare, Medicaid lottery. On August 17, UnitedHealth's

pharmacy management division said it was creating 600 new jobs in California through 2013. OptumRx is ramping up its order processing facility with an additional 250 jobs. The build out of the facility might be to provide adequate resources for the aging baby-boomer to tap their Medicare and Medicaid coverage. The activity in health care issues should continue to remain volatile as rumors persist amid the battle to increase the share of the government program's pie.