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In an effort to jointly deliver innovative solutions to federal and state governments, Humana Inc. (HUM - Analyst Report), on Wednesday, announced an alliance with CareSource, a non-profit health plan. The alliance was aimed at providing superior health care to Medicare, Medicaid and dual-eligible beneficiaries.

The financial terms of the deal were not divulged. However, the two companies will have an exclusive relationship in the states where they will work together.

The alliance aspires to profit from the cumulative experience of Humana and CareSource. While the former has over 25 years of experience in Medicare, the latter is proficient in the Medicaid business, with about 23 years of experience. Thus, together the two companies will be able to share each others’ knowledge and experience to provide superior quality service to policyholders.

CareSource is one of the largest Medicaid health plan in the U.S. with over 900,000 enrollees. However, most of its policyholders are located in Ohio, making it the largest Medicaid company in the state. On the other hand, Humana’s 5 million Medicare members are spread all over the U.S.

Humana has a strong Medicare business, which is further expanded through several joint ventures. The Medicare Part D PDP plan launched in collaboration with the Wal-Mart Stores in October 2010 expanded the company’s individual Medicare stand-alone PDP membership by 52.1% to 2.54 million at 2011-end, compared with 1.67 million at 2010-end.

Moreover, both the Humana Walmart-PDP and Humana’s alliance with CNO Financial Group Inc.’s (CNO - Analyst Report) subsidiary Bankers Life and Casualty Company to offer Humana Medicare products will enhance the company’s membership in prescription coverage plans and mail-order drug business.

Humana is already the fifth-largest health insurer on enrollment basis while the first and the second positions are occupied by WellPoint Inc. (WLP - Analyst Report) and UnitedHealth Group Inc. (UNH - Analyst Report), respectively.

The Zacks Consensus Estimate for Humana’s first-quarter 2012 earnings is currently pegged at $1.50 per share, down 3.2% from the year-ago quarter. Nevertheless, for full-year 2012, the Zacks Consensus Estimate stands at $7.79 per share, down 0.4% from 2011.

The company currently carries a Zacks #3 Rank, implying a short-term ‘Hold’ rating. Considering the fundamentals, we maintain our long-term ‘Neutral’ recommendation on the shares.

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