Control of Prodigy Health Group is shifting back to Connecticut, following Aetna Inc.”™s $600 million deal to acquire the giant health benefit administrator that once had its headquarters in Westport.
Based today in New York City, Prodigy promotes itself as the largest independent third-party administrator of self-funded health care plans with some 600,000 medical members and another 450,000 members in its pharmacy programs, with its rapid growth partly the result of a major acquisition campaign the past five years. Parent company Prodigy Health Holdings Inc. is owned by One Equity Partners.
As Aetna makes a move for Prodigy, the ultimate role of third-party administrators or TPAs is still being worked out by the federal government and states as the Patient Protection and Affordable Care Act comes under legislative, judicial and regulatory review.
Instead of paying an insurance company like Aetna and then making claims, under self-funded plans employers put money into trust funds subject to federal regulation, which then pays claims. Those funds often buy stop-loss insurance to cover extraordinary medical bills incurred by workers or their families.
In a conference call with investment analysts in late April, Aetna CEO Mark Bertolini suggested the combined companies would be able to find operational cost savings, without specifying the nature of those savings. The Hartford-based giant did not immediately say whether it would keep Prodigy”™s offices in New York City.
“There are synergies in the transaction ”¦ and we will go after those synergies,” Bertolini said. “More importantly though, I think the opportunity here is as we move into a market where employers will be considering at smaller levels to move to self-funding, that Prodigy will be an asset that we can use in that marketplace to offer a very affordable product which brings insurance to smaller employers, that 200 to 2,000 employer marketplace. And we also see it as a very valuable asset as it relates to our accountable care solutions marketplace, where we have a large hospital vertical today where we can now use that TPA in the hospital vertical to offer more competitive products to smaller hospitals.”
Prodigy does business under multiple trade names, including Meritain Health for its TPA benefits business, American Health for its medical management business and Scrip World for its pharmacy benefits management business.
Aetna said it hopes to expand Prodigy”™s business through its own provider networks and that Prodigy should help its client-retention efforts by offering a broader mix of services.
“Of the entire self-insured marketplace, we believe that ”¦ the TPA market is about 12 million employees large,” said Joseph Zubretsky, CFO of Aetna. “It is a marketplace that searches for a low-cost administrative platform or rental network and very low-touch and low-cost ancillary products with a very, very flexible administrative platform ”¦ From time to time, we have a client base in that 100 to 2,000 (member level) that flips back and forth between solutions. When they do that, we now have a vehicle to retain that customer.”
