Three mid-sized health insurers that recently took steps to put troubles behind them are possible prey: Coventry Health Care Inc (CVH.N), Health Net Inc (HNT.N) and WellCare Health Plans Inc (WCG.N).

"To the extent that healthcare reform creates consolidation, you could start to see companies like Coventry and Health Net and WellCare beginning to attract a consolidation premium," Stifel Nicolaus analyst Thomas Carroll said.

Major acquisitions are doubtful while Congress debates healthcare reform this year, analysts say. Not only is there uncertainty over potential changes to the market, but striking a high-profile deal just as lawmakers question the amount of competition in the sector might seem politically foolish.

As reforms take shape, however, the desire to get bigger could manifest in deals later this year or next year.

"Reform creates a need for scale," said Bob Atlas, chief operating officer of Avalere Health, a research and strategic advisory firm.

"For commercial players to be able to scale up, to have strong geographic footprints, breath of products, breath of provider networks is going to be a positive -- that's what an acquirer would be looking for," Atlas said.

The weak economy also may be driving a need to acquire more size, said Dave Shove, an analyst with BMO Capital Markets, although he notes the rocky markets have created less investment income for the companies to use in deals.

"In normal circumstances, there is an ongoing drive to consolidate because it's a mature business and membership is difficult to come by," Shove said. "In this environment, with higher unemployment and virtually no membership gains, the drive is probably more pronounced."

Although they have recovered some in 2009, shares of health insurers have stumbled badly since early last year because of profit warnings and uncertainty over healthcare reform.

"If you do have the cash, there's probably the ability to be opportunistic," Shove said. "It's not quite like buying a house out of foreclosure, but certainly some of these stocks are cheap."

After years of managed care consolidation, large-scale mergers seem unlikely now, one healthcare investment banker said.

"There's really only four or five major national players, and there's not much room to consolidate those," said the banker, who declined to be named. "There may be opportunity for some small to mid-sized regionals, but not on a large scale."

Coventry and Health Net, with market values of about $3 billion and $2 billion respectively, both reported first-quarter results that signaled to analysts that they may have moved past operational problems from last year.

Maryland-based Coventry could bring an acquirer regional strength in the private market serving employers, as well as members in the Medicare and Medicaid government health plans.

Health Net, which is conducting a strategic review of its Arizona and Northeast operations, has a big California presence and a military health insurance business.

Both companies also recently shifted their management, as has WellCare. Just this week, WellCare said it agreed to pay $80 million to settle healthcare fraud allegations in a case that has left a cloud over the company since agents raided its Florida offices in 2007.

WellCare, with market value of about $900 million, operates only Medicare plans for seniors and Medicaid plans for low-income Americans, so it would attract buyers looking for added strength in those areas.

"I'm not sure any of the boards have an outright goal of selling the organizations, but clearly any thoughtful board would have that option on the table," Shove said.

Coventry declined to comment, but Chief Executive Allen Wise said last month on the company's quarterly conference call that management "understands the company is not for sale."

A WellCare spokeswoman said the company did not feel it was appropriate to discuss the takeout speculation. A Health Net spokeswoman said the company does not speculate about what might happen in the market.

Other health plans may be more preferable targets.

As reforms make Medicaid a potentially more enticing market, three publicly traded companies that specialize in the area -- Amerigroup Corp (AGP.N), Centene Corp (CNC.N) and Molina Healthcare Inc (MOH.N) -- may draw interest. Small privately held Medicare-focused plans also may see bids.

At the same time, potential buyers, such as Cigna Corp (CI.N), might be less inclined to part with cash until investor concerns over balance sheets dissipate.

Stifel's Carroll said potential targets will also want to see their valuations rise before selling.

"As we get more visibility on healthcare reform, and if that visibility suggests that scale will ultimately win, I think at that point we see a marked increase in consolidation," Carroll said. (Additional reporting by Jessica Hall in Philadelphia, editing by Gerald E. McCormick)