Aetna buys back its mental health division

The insurer had sold it to Magellan Health Services before that company filed for bankruptcy.

By Robert Kazel, AMNews staff. Dec. 27, 2004.

Hartford, Conn.-based Aetna says it will spend what it expects to be more than $50 million to buy back certain assets of Magellan Health Services, including three dedicated behavioral health service centers that now serve only Aetna patients.

Magellan, which emerged from Chapter 11 bankruptcy early this year, will lose its biggest client as a result, because Aetna will be ending a contract with Magellan under which the mental health carve-out company has provided services to most Aetna members. Aetna has been responsible for about 37% of Magellan's revenue in 2004.

About 80% of Aetna's 13.6 million members get behavioral health benefits through Farmington, Conn.-based Magellan. Aetna in March 2003 announced it had extended its contract with Magellan through December 2005.

Aetna sold the assets of its mental health division to Magellan for more than $400 million in 1997 as part of a rapid expansion by Magellan in the consolidating mental-health managed care industry. The transfer back to Aetna is scheduled to occur Dec. 31, 2005. The new division will be named Aetna Behavioral Health.

Patients will continue to be managed by service centers, located in Utah, California and Pennsylvania, but Aetna will own and administer the centers and oversee the physician networks, which are expected to remain essentially the same.