Posted on Jul 14, 2011 by Sergio Ulloa
India's emergent healthcare industry, which features an abundance of specialist medical facilities
, an extensive network of healthcare providers and increasing demand for services
, is fast becoming an attractive investment opportunity for many multinational companies. On Monday, the international arm of American health insurance powerhouse Aetna became the latest firm to enter the market through the complete acquisition of a 100 percent stake in Indian Health Organization Pvt Ltd (IHO).
The move marks Aetna International's first foray into India and will provide the US-based health benefits company with a solid customer base of 80,000 enlisted IHO members upon which to further develop its platform in the country. Aetna will also be given access to IHO's robust network of healthcare providers as well as the preventive care and wellness programs specially tailored to the Indian market. While the financial details of the transaction have not yet been disclosed, Aetna has intimated that they plan to retain the management and all employees at IHO. The Indian company will maintain its existing leadership structure and continue to operate as a separate business within Aetna International, reporting out to the Southeast Asia region office.
IHO is just a three-year old business, started up by two Delhi-based entrepreneurs Visham Sikand and Sunando Sen to provide medical and dental care to participating policyholders at a discount through an accredited healthcare provider network encompassing over 2,500 doctors, 500 dentists, 800 pharmacies and 300 clinics is 18 different cities across India. The company supplies a health card for an annual fee which enables clients to access diagnostic tests and health consultations at discounted rates. The annual charges for an IHO health card range from INR 1,545 (US$35) for individuals to INR 2,648 (US$60) for a one-year family plan and Rs.3,971 (US$90) for a two-year membership. The company has also unveiled a priority plan, which offer higher levels of discount for INR 3,530 (US$80) annually for single membership and Rs.4,853 (US$108) for couples.
Commenting on the acquisition of IHO, Aetna's Managing Director for Southeast Asia, Derek Goldberg explained that their interest in the Indian healthcare marketplace was well founded. "India's growing health care market presents tremendous opportunity. The out-of-pocket medical spend in India is more than $30 billion annually, which is more than 60% of the total health care expenditure in the country. The service offered by IHO targets that direct consumer spending on health care by providing access to primary and preventative care," Goldberg said.
Aetna believes that combining their global expertise and resource strength with IHO's provider network and local market insight will ultimately be of benefit to consumers, making healthcare products even more affordable and accessible in India. Goldberg added that it was important for Aetna to diversify its operations further into South Asia, stating "IHO provides Aetna with the opportunity to develop a presence in India and build out a broader provider network, serving both the local market and our expatriate members."
Aetna International has been of the market leaders in the expatriate healthcare business, supporting over 400,000 members worldwide. Aetna recently launched a new suite of International Healthcare Plans
(IHP) designed to cater to both expatriate employees and employing companies in order to make health benefits more accessible for members while abroad. India has a sizeable middle-class workforce overseas
and it will become increasingly important to have an understanding of how best to provide them health benefits and security.
Visham Sikand, IHO's co-founder and business development head, confirmed that Aetna's involvement will be of great benefit to his company and India's healthcare network as a whole. "As a global leader in health care, Aetna has the expertise and resources to take IHO's business to the next level. I am excited about the prospects of making quality health care and wellness programs more affordable and accessible for consumers in India," Sikand told the media.
Aetna's acquisition of IHO has followed a slew of deals conducted by private equity firms looking to fund India's escalating healthcare needs. These investments include HDFC PE's purchase of a 12 percent stake in e-hospital MediAngels and Sequoia Capital and Elivar Equity INR 1.5 billion (US$3.4 million) outlay for a minority stake in Glocal Healthcare System's hospital chain. The Indian government has also been looking to develop public-private partnerships in hospitals to improve and expand healthcare access towards the more remote and impoverished areas of the country.
Recent moves made India's regulatory authorities have opened up many of the country's industries to greater foreign capital investment
. This has been particularly welcome development in the insurance industry.
Since the insurance market in India was first opened up to the private sector in 1999, total insurance penetration has doubled and the domestic protection industry has overtaken several developed markets in output. There has been a substantial rise in insurance coverage, with both the number of life and health insurance policies increasing many times over
. Despite this progress, Indian insurers themselves have yet to make a mark internationally in either sales or market capitalization. While premium income in the Indian insurance market within the upcoming decade is projected to reach between US$ 350-400 billion
, a combination of regulatory adjustments and fierce competition between both local and international companies is expected to hamper profitability and constrict many insurers' margins in the short term.
Insurance Companies Mentioned
Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans and expatriates.