Aetna adds behavioral business The health insurance giant will assume functions now performed for it by Magellan Health Services.

Posted: December 09, 2004

Aetna Inc. is getting into the behavioral health insurance business.

The region's second-largest health insurer said yesterday that on Dec. 31, 2005, it would end its contract with Magellan Health Services Inc., the company that now provides Aetna subscribers with behavioral health coverage to pay for the evaluation and treatment of mental health problems.

Aetna also is buying the assets that Magellan used to service the behavioral health insurance needs of more than 10.5 million Aetna subscribers, including access to a network of psychologists, psychiatrists and other providers.

Aetna will pay Magellan an estimated $50 million to $55 million for the assets; Magellan will repay $49 million in notes it owes Aetna stemming from Magellan's 2003 bankruptcy case.

"We believe we will be better able to integrate our behavioral health benefits with our full suite of medical and specialty products," John W. Rowe, Aetna's chairman and chief executive officer, said in a statement.

Rowe said the decision to bring behavioral health coverage in-house fits Aetna's strategic direction, will provide better coverage to subscribers, and will save money.

"There are important connections between mental and physical health that can be improved when these services are managed in an integrated manner," Rowe said. "By examining both medical and mental health claims data, we can make these connections and provide information to doctors, counselors and patients to help them improve health . . . while also helping manage health care and pharmacy costs."

Among the assets Aetna will get are three behavioral health insurance service centers, in El Segundo, Calif.; Sandy, Utah; and King of Prussia. An Aetna spokesman said the centers employ about 500 people, including more than 200 in King of Prussia.

The final purchase price will depend on "the number of Magellan providers that agree to provide services to Aetna as well," Magellan said.

Magellan remains the behavioral health contractor for Independence Blue Cross, the region's largest health insurer.

Magellan angered many area psychologists this year when it announced it would cut payments to providers by 11 percent for treating Blue Cross members.

Magellan said its contract with Aetna resulted in $170.4 million in net revenue during the first nine months of this year.

Aetna's stock rose $1.60 yesterday to close at $120.50. Magellan's fell 29 cents to $32.64.

Contact staff writer Josh Goldstein at 215-854-4733 or

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