The Aetna-Humana deal
The combined company would cover more than 33 million people.
Only UnitedHealth Group Inc. and the Blue Cross-Blue Shield carrier Anthem Inc. cover more people.
Aetna-Humana would be the second-largest insurer by revenue.
Aetna’s offer includes a combination of $125 in cash and $105.11 in Aetna shares for each Humana share. The total represents a premium of 29 percent to Humana’s trading price in late May.
The deal’s total value is about $37 billion counting debt.
Source: Associated Press
Insurance giant Aetna said Friday that it has agreed to buy rival Humana for $37 billion in a deal that reflects the rampant consolidation in health care.
The acquisition, if approved by shareholders and regulators, will roughly double Aetna’s membership in Georgia.
Hartford, Conn.-based Aetna has roughly 700,000 Georgia members in its health plans, while Louisville, Ky.-based Humana covers 692,000 in Georgia.
Blue Cross and Blue Shield of Georgia, with about 3 million members, will still be the leading health insurer in the state if the Aetna-Humana merger deal is completed.
Nationally, the combined Aetna-Humana company would cover more than 33 million consumers.
As for consumer premiums, Bill Custer, a health insurance expert at Georgia State University, said that “it’s too hard to tell” what the effect of insurer consolidation would be.
Those premiums are already rising “because the price of health care is going up,” he said.
Consolidation among hospitals and among insurers has become a dominant theme in recent years as pressure has increased on containing health costs and improving quality.
The Affordable Care Act, also known as Obamacare, has created more customers for health insurance, and has led insurers to seek cost savings. And last week the U.S. Supreme Court buttressed that growing customer market by upholding all existing subsidies for ACA exchange users.
The merger would make Aetna a sizeable player in the rapidly growing Medicare Advantage business, which offers privately run versions of the federally funded health care program for the elderly and some people with disabilities.
The combination also would bolster Aetna’s presence in the state- and federally funded Medicaid program and Tricare coverage for military personnel and their families.
Health insurers are eager to do more business with government payers due in part to a Medicaid expansion fostered by the health care overhaul and Medicare Advantage’s surging enrollment. Obamacare is expanding Medicaid coverage in some states as it seeks to provide health coverage for millions of uninsured people.
Meanwhile, total enrollment in Medicare Advantage plans has tripled over the past decade to about 16.8 million people and is expected to keep growing as more baby boomers become eligible for the plans. Aetna’s acquisition of Humana would make it the largest provider of Medicare Advantage coverage, with 4.4 million members, a figure that could change depending on regulatory review.
“Government markets are the most rapidly growing aspect of the system,” said Dan Mendelson, CEO of the market research firm Avalere Health.
Health insurers are also seeking more clout in striking deals for medical care and prescription drugs.
Blue Cross of Georgia’s parent company, Anthem, is pursuing Cigna, another large national insurer. And Thursday, Centene, the parent company of Peach State Health Plan in Georgia, said it will buy Health Net for about $6.3 billion.
The Aetna cash-and-stock deal would be the largest ever in the insurance industry, Reuters reported.
A deal the size of Aetna/Humana could trigger regulatory scrutiny on antitrust grounds, said GSU’s Custery.
The combination would have less effect on metro Atlanta – where there are more insurance options – than on other areas of the state, which have less insurer competition, Custer said.
Such insurer consolidation “will increase their ability to negotiate with [medical] providers,’’ Custer said. “Providers will be affected.”
Those premiums are already rising “because the price of health care is going up,” he said.
The Aetna acquisition is expected to close in the second half of 2016.
“The acquisition of Humana aligns two great companies and will significantly advance our strategy of more effectively serving members in a rapidly changing health care industry,” Mark Bertolini, the Aetna chairman and chief executive, said in a statement.
“This combination will allow us to continue to invest in excellent service for our members and strengthen our partnerships with providers to deliver high quality care at an affordable price.”
Aetna said it expects to achieve $1.25 billion in annual cost savings by 2018 after the merger.
Plans are for Bertolini to serve as chairman and chief executive of the combined company.
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