Insurance company Cigna Corporation has reached an agreement to buy health-maintenance organization Healthspring Inc. in a move that triples the number of Medicare customers the company serves, according to Bloomberg.

Cigna's new acquisition of nearly 1.2 million Medicare customers gives it a large stake in one of the fast-growing insurance products sold to consumers. The influx of Medicare customers now has the company looking for acquisitions of properties that will help it increase its number of customers under age 65.

The move comes in anticipation of the 2010 health act passed by Congress, which will soon permit state health insurance exchanges to service consumers. Cigna, in response, is attempting to stock up on individual policyholders, particularly in the United States. Although Cigna is the world's leading provider of insurance policies to offshore employees of multinationals, it has not built up as strong of a network domestically.

The movement is not surprising given the legislative decisions that are changing how the insurance industry conducts business, but Cigna management says its business strategy predates the passing of any legislation. But mergers such as this could cause ripple effects throughout the insurance industry -- Healthspring's prior pharmacy benefits management network, for example, is expected to be cut and absorbed by Cigna's current PBM network.

San Diego mergers and acquisitions attorneys following news of the deal noted that roughly 75 percent of American senior citizens are covered by Medicare, as opposed to commercial plans. This gives Cigna and other companies in the Medicare market a huge opportunity for revenue growth in the coming years.

Source: Bloomberg "Cigna Agrees to Buy Healthspring to Expand Medicare Business" Oct. 24, 2011