Medica invests $34 million in Massachusetts IT firm

July 14--Minnetonka-based Medica has invested about $34 million in a Massachusetts IT company that the local health plan hired four years ago to build a new administrative platform.

The IT platform from a company called HealthEdge integrates information from a variety of software systems including those for billing premiums, paying claims and managing care, said Mary Quist, vice president for finance at Medica.

The insurer pointed to a recent report that shows health plans are making a number of investments in private companies and technology firms, driven in part by changes in the federal Affordable Care Act (ACA). Medica is using the administrative platform from HealthEdge solely for the individual health insurance market, which has undergone significant ACA-related changes since 2014.

"We're going to rely on this platform to do a lot of things, and we want to make sure that the company is there to do it for us," Quist said in an interview. "In order to advance the new technology, sometimes you need to invest in the company."

Medica invested $9.3 million in February 2015, according to regulatory filings, and nearly $25 million more in late 2016. Last year was the worst ever in terms of financial performance for Medica, which saw losses from managing Medicaid health plans and selling coverage in the individual market.

Shift from legacy platforms

The insurer did not disclose how much it paid for the IT platform itself.

The trend in health plans actively investing in private companies was noted in a May report from CB Insights, a New York-based research firm.

"Insurers are still looking for more ways to manage the health of their covered population, differentiate their offerings, and get new data sets, among other efforts," the report says. "To do this, some of the larger health insurance companies have looked to private markets for investments or acquisitions."

Quist said work on the technology platform at Medica fits with another trend, where health plans in recent years moved away from legacy IT platforms to new systems that could better adapt to ACA changes such as tax credits and cost-sharing reductions.

With headquarters north of Boston, HealthEdge is privately held with 265 employees. The company said it does not disclose investment information.

Medica is a minority investor in the company, Quist said. The insurer hopes to make a return on the investment much like its other financial holdings, she said, adding that the size of the investment is unusually large.

"It's a higher level of investment than we would typically do in any one entity, because this is the entity that is partnering with us to develop our administrative capabilities," Quist said.

Twitter: @chrissnowbeck

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