Hunt Valley health firm is sold again

ConnectYourCare is bought 2 years after previous sale

October 12, 2007|By M. William Salganik | M. William Salganik,Sun Reporter

ConnectYourCare, a Hunt Valley company that manages health plans linked to tax-sheltered savings accounts, has been sold to Express Scripts Inc., of St. Louis, the companies announced yesterday.

The deal gives ConnectYourCare access to customers of Express Scripts, which manages prescription benefits. Both companies sell specialized management services to insurers, employers, administrators of self-insured plans, unions and governments.

Express Scripts manages pharmacy benefits for about 50 million people and had revenue of $17.7 billion last year.

Terms of the deal were not disclosed.

ConnectYourCare produces and operates the infrastructure to run consumer-directed health plans, which have lower premiums but high deductibles.

Users typically save money on a pretax basis in health savings accounts to pay those higher deductibles and out-of-pocket costs. The company manages about 100,000 accounts, some of them for individuals and some for families.

ConnectYourCare had been seeking "a much larger national partner" for about nine months, said Terry Hunter, chief executive officer, but didn't want to be acquired by a health insurer or a bank because that would have made it difficult to sell its services to other insurers or banks.

ConnectYourCare, with about 50 employees, will continue to operate as an independent unit, keeping its employees and management, Hunter said.

Sandy Schenck, director of consumer-directed health care for Express Scripts, said the acquisition is a good fit. In managing pharmacy benefits, he said, Express Scripts wants to help members understand ways to save money, such as opting for generic drugs.

And consumer-directed plans, such as those administered by ConnectYourCare, also stress consumer price and quality information.

Because patients have to spend more of their own money, they are more likely to shop more carefully, promoting competition and discouraging unneeded care, proponents say.

"We think it all lines up with our focus," Schenck said.

Consumer-directed plans got off to a fast start, said Steve Davis, managing editor of the trade publication Inside Consumer-Directed Health Care. When his publication started in 2002, he said, 80,000 people were enrolled. Now, he estimated, enrollment has reached about 12 million.

The field started with small niche companies such as ConnectYourCare, but as consumer-directed products became more popular, many of the small companies were snatched up.

Two of the largest consumer-directed niche companies were bought in 2005 by giant health insurers, Definity Health by UnitedHealth Group and Lumenos by WellPoint Inc.

Since then, Davis said, the pace of acquisitions has slowed. "I don't know who's left to acquire, except for the software and tools companies," he said.

Though the growth has been substantial, it has been slower than many had predicted, said Gary Claxton, vice president of the Kaiser Family Foundation.

The foundation's latest annual survey found flat growth, with 5 percent of those with employer-provided insurance participating. The survey doesn't measure policies bought by individuals, which has been a major area of growth.

Davis and Claxton said smaller increases in insurance premiums in the past few years had reduced the incentive for employers to switch. That could change if insurance rates begin rising more steeply, Claxton said. ConnectYourCare, founded in 2003, was sold two years ago to Revolution Health, a startup by Steve M. Case, founder of America Online. Revolution announced the acquisition of six other consumer-directed companies the same day.

Since then, Hunter said, Revolution has turned more to online information and to retail clinics, prompting ConnectYourCare to initiate a search for a new owner.

bill.salganik@baltsun.com

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