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Connecture buys exchange competitor ConnectedHealth


Connecture Inc., a technology company that builds online health insurance marketplaces, has acquired ConnectedHealth L.L.C. in a bid to spark its struggling operations.

Financial terms were not disclosed.

Connecture, which went public in late 2014, recorded $96 million in revenue in 2015 and anticipates revenue will reach up to $110 million this year. However, the company has yet to turn a profit.

Connecture's stock has cratered since it started trading on the Nasdaq. After opening at around $9 a share in December 2014 and reaching a high of $12.90 in April 2015, Connecture is trading only at $1.27 this month.

That's partly because private health insurance exchanges have not taken off like many consultants and pundits predicted. Private exchanges serve as online shopping hubs for consumers and employees who are buying and comparing health coverage. In the employer-based private exchanges, companies often give their workers a fixed amount of money to pick a health plan they want.

Employers, governments and health insurers farm out the technology operations to companies like Connecture. The Brookfield, Wisconsin-based firm works with many large plans, including several Blue Cross and Blue Shield affiliates. Connecture also maintains the technology behind Medicare.gov and a few of the Affordable Care Act's state-based exchanges.

Some large employers such as Hallmark Cards and Walgreens Boots Alliance have moved their employees to private exchanges, but that represents only a small slice of the entire privately insured market. Only about 6 million workers bought a health plan through a private exchange in 2015, according to consulting firm Accenture, which has been bullish on the trend.

The ConnectedHealth acquisition grows Connecture's revenue and list of midsize employer clients. ConnectedHealth also had a tight relationship with Capital BlueCross, a Blue Cross and Blue Shield plan in Pennsylvania that made investments in ConnectedHealth.

Connecture executives weren't immediately available for an interview. CEO Jeff Surges told Modern Healthcare last year that even before acquisitions, the company had a reliable and expanding customer base that included larger relationships with organizations like Blue Cross and Blue Shield of Michigan and Kaiser Permanente.

“I don't think it's a turnaround at all,” Ms. Surges said when he was hired as CEO in November. “I think it's taking the base model here and positively growing on it.”

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.