Humana to buy UnitedHealth's Medicare Advantage business

Humana Inc., one of the nation's largest health insurers, announced Monday that it had agreed to buy UnitedHealth Group's Las Vegas-based Medicare Advantage business for $185 million.

The move comes on the heels of UnitedHealth's antitrust approval earlier on Monday as the payer secured a deal to acquire Sierra Health Services. UnitedHealth received antitrust approval on the condition that it sell most of its Las Vegas Medicare business.

It's perhaps not surprising that UnitedHealth would begin by offloading its Medicare Advantage plans, which cover some 25,000 lives in the area. The Medicare Advantage program, promoted by the Bush Administration as a way of privatizing aspects of the public payer program to improve cost options for beneficiaries, has become a somewhat dicey business while remaining the subject of Congressional scrutiny in recent weeks.

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In a Feb. 7 hearing, Sen. Charles Grassley (R-Iowa) called into question the sales tactics used by agents offering the plans to seniors. Grassley contended that the sales agents work on commission, and are motivated to sell the policies for lucrative gains rather than serve beneficiaries.

Medicare Advantage business took a hard hit last summer when the Centers for Medicare & Medicaid Services barred seven health insurers from marketing the controversial plans due to questionable sales tactics.

Humana and UnitedHealth officials have said its existing benefits and coverage will not be interrupted or changed following the transaction. Humana doesn't expect the purchase to affect its 2008 earnings.