The first of the Baby Boomers turn 65 this year, and health insurance carriers are paying attention. Aetna has agreed to purchase Genworth’s Medicare supplement business for $290 million. Going forward, Aetna expects to post yearly gains from the Medicare supplement (also known as Medigap) business. This makes sense given that the Baby Boomers will be flooding into the Medicare (and Medicare supplement) system over the next two decades.
I would not be surprised to see other health insurance carriers expanding their Medicare supplement business over the next few years. Carriers who focus primarily on market sectors like wealth preservation and long term care coverage might find that it’s more profitable to sell their Medicare supplement business. At the same time, carriers that are already primarily focused on health coverage (like Aetna) might find that putting more focus on Medigap coverage is a good way to capitalize on the rapidly expanding population of people in need of Medicare supplements. In addition, it could provide more stability to health insurance carriers after all of the uncertainty that has surrounded health care reform.