Health Inc.

Health Insurers Look Far Afield For Future Profits

Where are health insurers looking to make money tomorrow? In some places that have little to do with their current business of covering health care for the masses.

In Sunday's Washington Post, Christopher Weaver, a reporter for Kaiser Health News' whose byline you might recognize from Shots, had a provocative look at where insurers are placing their bets. Since the middle of 2009, only six of 25 major deals by the nation's biggest insurers have been for companies that run health plans.

Where's the money going instead? To businesses that aren't regulated as heavily as insurers and whose prospects for growth look better in the wake of the big federal health law.

For instance, health insurance giant UnitedHealth bought ChinaGate, a consulting firm specializing in bringing new medical products and services to China, last year. Other recent acquisitions included Picis, an information technology vendor to hospital ERs and ICUs, and Wellness, a medical screening company.

The trend in purchases of companies not directly involved in health insurance is driven, in large measure, by the federal health law. "They're very synergistic with the health-insurance," Sanford C. Bernstein analyst Ana Gupte says in the story, and could help insurers control medical costs while also raising earnings.

The starkest assessment of the future for health insurers comes as a coda to the story. David Brailer, a health IT guru in the George W. Bush administration who now runs an investment firm, says:

If you're a health plan, you either become a care delivery system or an information services company. The traditional business is dead.

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