If allowed to continue on its present course, Medicare will be on track to consume 7 percent of America’s gross domestic product by 2035. That figure is double the current level. Politicians are stalemated over competing fixes and use each others proposed plans as a battle cry for the upcoming election.
Searching for something that might form a compromise, policy experts have turned to concept of health exchanges, a virtual marketplaces offering standardized health insurance policies. This is the foundation of the Affordable Care Act. The government subsidizes policies, with the greatest amount going to the poor and the sick.
Health exchanges are appealing to most Republicans because they generate competition and offer choice. Most Democrats can agree on the exchange system because they provide a minimum level of coverage regardless of income.
Yesterday, Towers Watson, New York, agreed to pay $435 million for Extend Health, a San Mateo, California company. The companies will close on the deal within 60 days. The Wall Street Journal reported “Purchase is expected to nick Towers Watson earnings in year one, boost them slightly thereafter.”
Extend Health runs the largest private Medicare exchange, working with private clients including Caterpillar Inc. (CAT) and Ford Motor Co. (F), as well as municipalities and local governments, including the state of Nevada, to allow retirees to shop among health-care plans.
Under the terms of the deal, the company will operate as a new business segment within Towers Watson. Called Exchange Solutions, the segment will have more than 300 employees and will be led by Bryce Williams, the co-founder and chief executive of Extend Health.
The deal is something of a shift for Towers Watson, which has previously operated as an employee-benefits consultancy. But Towers Watson Chief Executive John Haley told Dow Jones Newswires that Extend Health’s existing infrastructure, system of call centers, technology and agreements with insurers will ease the integration.
Health-care exchanges have been under scrutiny since the Affordable Care Act (ObamaCare) mandated exchanges. Analysts report that Extend Health’s current business will not be affected by the pending Supreme Court decision in June.
The hefty purchase price for Extend Health signals industry confidence in the health exchange system, something both Republicans and Democrats should acknowledge as a positive sign.