By Leslie Small

Although 2021 has just begun, major health insurers appear to be wasting no time when it comes to spending the influx of cash that they’ve collected as a result of lower routine health care utilization during the COVID-19 pandemic.

On Jan. 4, Centene Corp. revealed that it struck a deal to purchase Magellan Health, Inc. for $2.2 billion, a transaction that promises to augment the insurer’s existing behavioral health, specialty health care and pharmacy management assets. Two days later, UnitedHealth Group said it plans to purchase the technology company Change Healthcare for approximately $13 billion in a deal that will bolster its analytics and advisory arm, OptumInsight.

Taken together, Centene and UnitedHealth’s moves are “really interesting and sizable transactions to kick off the new year given that the buyers were clearly going through [due] diligence during a volatile election cycle and pandemic,” observes Timothy Epple, a principal at Avalere Health.

Centene’s latest acquisition is especially timely given the news that Democrats will have control of the White House and the House of Representatives, plus a narrow majority in the Senate, Epple suggests. The election results “suddenly make that deal look even more attractive given the probable stability and growth tailwinds for government and [Affordable Care Act] markets,” he says.

Further, “while the Change transaction is riding analytic tailwinds that are somewhat party-agnostic, reduced volatility in the near-term policy outlook is a positive for M&A activity across the health care ecosystem,” Epple adds.

Wall Street analysts say the deals make strategic sense for the acquiring organizations, which have been aggressive about inorganic growth.

“We see this transaction as complementary as it builds on [UnitedHealth’s] focus and expansion of Optum, with Change’s data and analytics platform augmenting offerings within OptumInsight,” Citi analyst Ralph Giacobbe wrote in a note to investors. “We expect continued M&A from [UnitedHealth] in its efforts to continue to grow and scale its Optum segments, as we have seen over the years,” he added.

Regarding the Centene/Magellan tie-up, Oppenheimer’s Michael Wiederhorn offered an optimistic take. “Overall, we believe this deal continues Centene’s efforts to strengthen its capabilities in serving the highly complex portion of the government population,” he advised investors.