News Room
Coventry Health Care to Acquire Mutual of Omaha Employer Health Business
Mutual of Omaha Exiting Group Health Market
OMAHA, Neb -- (April 26, 2007) Coventry Health Care, Inc., will acquire Mutual of Omaha’s Nebraska and Iowa employer-based group health insurance business as well as its Federal Employees Health Benefits business as Mutual of Omaha exits the group health line, the companies announced today.
The $120.0 million all-cash transaction is expected to close in 60 to 120 days, subject to closing conditions, regulatory and other customary approvals.
Mutual of Omaha’s action affects its major medical coverage delivered through PPO, POS, HMO and indemnity contracts. It does not impact the company’s other employer-based coverages.
The majority of Mutual of Omaha associates who support the company’s employer-based health business affected by the transaction will transition to Coventry, which will significantly expand its Omaha presence as well as maintain Mutual’s health care service centers in Aberdeen, S.D., and Charlotte, N.C.
Mutual of Omaha will immediately cease new sales of employer-based health insurance. Mutual’s group health customers in Nebraska and Iowa and its Federal Employees Health Benefits customers will transition to Coventry upon completion of the transaction. Mutual’s group health clients outside Nebraska and Iowa will be non-renewed in the coming months. In both cases, there are no immediate changes for those covered by Mutual of Omaha health insurance plans – they may continue to use their current ID cards, see their current providers and receive the same benefits.
Mutual of Omaha remains fully committed to the employer market, offering employer-based life, disability, dental and supplemental health insurance; retirement plans; TPA stop loss; and voluntary insurance products.
“Mutual of Omaha’s employer-based health insurance business was at a crossroads. Significant investments would be required to build the technology needed to support the next generation of consumer-driven health products. Yet this investment would not mitigate the market forces we face,” said Mutual Chairman and CEO Dan Neary.
“This transaction with Coventry Health Care is truly a win-win. It allows Mutual of Omaha to focus on its growth products for the employer market while also ensuring continued access to excellent health coverage and service for our Omaha-area and federal clients and preserving employment for Mutual of Omaha associates,” Neary said.
“The acquisition of Mutual of Omaha’s Nebraska and Iowa employer group health insurance business and their Federal business is a significant transaction for Coventry’s Commercial Business Division,” said Coventry Health Care President Thomas P. McDonough. “We look forward to carrying on Mutual of Omaha’s commitment to the local health plan business and their tradition of providing superior service levels to their customers.”
Both Mutual and Coventry have similar service philosophies and reputations built on delivering service excellence, and both companies are committed to ensuring a smooth transition.
Exiting the employer-based health market was a difficult but necessary decision for Mutual of Omaha, which has provided group health insurance for more than 50 years, Neary said.
“Growth in the group health line was constrained by lack of scale outside the Nebraska-Iowa market, which prevented competitive provider contracts, and by the extensive infrastructure and new technology investments required to support the product,” Neary said. “Because of these factors, we made the strategic decision to exit the group health product line and focus our efforts on product lines with stronger growth potential.”
The company’s group health insurance was actively marketed in seven strategic markets outside Omaha: Atlanta, Chicago, Dallas, Denver, Kansas City, Los Angeles, and Seattle.
Mutual of Omaha is a full-service organization providing insurance and financial products for individuals, businesses and groups throughout the United States. For more information about Mutual of Omaha, visit www.mutualofomaha.com.
Coventry Health Care (www.cvty.com) is a diversified national managed healthcare company based in Bethesda, Md., operating health plans, insurance companies, network rental and workers' compensation services companies. Through its Commercial Business, Individual Consumer & Government Business, and Specialty Business Divisions, Coventry provides a full range of risk and fee-based managed care products and services to a broad cross section of individuals, employers and government-funded groups, government agencies, and other insurance carriers and administrators.