UnitedHealth Group buys into hearing aid benefits

UnitedHealth Group is pushing further into the hearing aid business by purchasing the subsidiary of a Swiss hearing aid manufacturer that manages insurance benefits for the devices.

The Minnetonka-based health care giant said it has directed customers for more than a decade to a company called Epic Hearing when employers want to supplement their employee health insurance plan with financial benefits for workers who need hearing aids.

Now, UnitedHealth's health insurance division will sell the coverage directly through a "specialty benefits" division that also offers vision, dental and "income protection" policies, said Tom Wiffler, chief executive for specialty benefits at UnitedHealthcare.

In an interview with the Star Tribune, Wiffler confirmed that UnitedHealthcare acquired Epic Hearing, a subsidiary of Sonova Holding AG, on March 30. Financial terms were not disclosed.

"We think there's a growing demand for hearing solutions in America," Wiffler said. "Earbud usage has caused some hearing loss in folks as young as 20s and in their 30s. [We're] trying to bring the full suite of offerings to employers and consumers."

Sonova said its Epic Hearing business had about $50 million in revenue in its most recent year. The manufacturer did not disclose the buyer in slides presented at a recent audiology conference.

"New owner best positioned to propel growth of Epic," the company said in the slides. "Sonova poised to benefit from accelerated growth of Epic."

The deal is the latest of three involving UnitedHealth Group that have become public in the past week or so. Last week, a rating agency said the company was part of a $2.2 billion acquisition of a physician-staffing company based in Washington. United also said last week that it was purchasing a Medicare HMO in Louisiana.

Company Chief Executive David Wichmann did not mention any of the recent deals at an investor conference in May, but commented: "We view M&A as a core capability at UnitedHealth Group."

Epic Hearing has been part of the recent rise in the U.S. of hearing benefits and companies known as "hearing benefit managers," according to a January report from analysts with Bernstein Research. It noted that Kentucky-based health insurer Humana announced last year it would add hearing aid benefits to Medicare Advantage health plans in more than two dozen states.

Hearing benefit managers create a network of providers who agree to both furnish and fit hearing aids at a negotiated price that represents a discount on retail, said Lisa Bedell Clive, one of the Bernstein analysts. In the U.S., the insurer often purchases the hearing aid, Clive said, and directs patients to specific retailers to buy with a co-payment.

In their report, Bernstein analysts said the typical retail price per hearing aid is about $2,000, whereas the out-of-pocket cost with the most generous hearing benefits generally runs $500 to $700 per hearing aid. They estimated that revenue at Epic Hearing has grown at a low double-digit rate over the past eight years.

"We estimate that today, perhaps 5 percent to 10 percent of U.S. hearing aid private market purchases are at least partly funded by insurance," analysts wrote. "We believe that in 5 years, 15 percent to 20 percent of purchases in the U.S. private market could be partly insurer funded, with further uplift thereafter."

In 2011, UnitedHealth Group launched a program called Hi Health Innovations to provide low-cost hearing aids to health-plan subscribers. The program is part of the company's Optum division for health services and will continue running alongside the new business, said Wiffler, the UnitedHealthcare official.

"They're very complementary," he said. "We know that there are more than 48 million Americans who have some degree of hearing loss."

Sales have been sluggish at Hi Health Innovations, likely because the program involves purchasing hearing aids online rather than with in-person counseling from an audiologist, according to the Bernstein analysts. UnitedHealth Group says it also works through a network of hearing professionals.

For hearing aid manufacturers, the rise of insurance coverage for the devices cuts both ways.

"The potential to bring in new customers by lowering out-of-pocket costs should increase volumes in the market," the Bernstein analysts wrote. "However, involvement of insurers could put extra pressure on retail pricing and margins."

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck