With takeovers of managed care providers exceeding $14 billion in less than a year, Health Net Inc. and WellCare Health Plans Inc. are among the last remaining targets as aging baby boomers and the new health-care law boost demand.

Aetna Inc. said yesterday it will expand further into plans administering Medicare and Medicaid with a $5.6 billion purchase of Coventry Health Care Inc., the biggest takeover of a U.S. health maintenance organization since 2005, according to data compiled by Bloomberg. The announcement follows Cigna Corp.'s agreement in October to buy Healthspring Inc., and the WellPoint Inc. disclosure last month that it will acquire Amerigroup Corp.

Demand for Medicare, the U.S. health plan for the elderly and disabled, is on the rise with 8.6 million more Americans projected to enroll by 2016 as the first wave of baby boomers turns 65. At the same time, the Patient Protection and Affordable Care Act upheld by the Supreme Court in June will add more patients to Medicaid, which provides coverage for the poor. Stifel Financial Corp. says the next takeover targets may include WellCare, both a Medicare and Medicaid insurer, or Health Net, which like Coventry offers commercial insurance in addition to the U.S. government-sponsored plans.

“You still could see more consolidation,” Maria Mendelsberg, a Denver-based fund manager at Cambiar Investors LLC, which oversees $7 billion, said in a telephone interview.

“Obviously the list is getting shorter and shorter just because you've had a lot of transactions, but I think a lot of these bigger companies want to boost their Medicaid and Medicare businesses because those are the areas that are growing.”

Eoin Treacy's view When I last reviewed health insurers on June 28th , there was considerable variability in the performance of the respective shares. What has become evident over the intervening months is the considerable amount of consolidation going on inside the sector.

Aetna moving to acquire Coventry Healthcare is but one example. Delphi Financial Group has been acquired by Japanese listed Tokio Marine Holdings, Healthspring has been acquired by Cigna, Continucare has been acquired by Metro Health Networks and Allied Healthcare has been acquired by Acromas Holdings Ltd. The pace of takeovers suggests that there is still potential for some further consolidation.

While a number such as Primerica are susceptible to mean reversion, a number of other shares have interesting charts. United Health Group has returned to test the region of the 200-day MA and the upper side of the underlying trading range. Torchmark continues to consolidate in the region of its highs and a sustained move below the MA would be required to question potential for additional upside. Kansas City Life Insurance broke out of a three-year range in July and has been consolidating above $34. A sustained move below that level would be required to begin to question medium-term potential for additional upside. MedCath Corp has held a progression of higher reaction lows as it ranges below $8. A clear downward dynamic would be required to check potential for a successful upward break.