Aetna, Humana Merger Marks Sway of Health-Care Law

3 Jul 2015 | Author: | No comments yet »

Aetna buys Humana for $37B amid record number of health care deals.

Health care-insurance firm Aetna announced a $37 billion agreement Friday to acquire smaller rival Humana in a deal that continues the rapid consolidation in the U.S. health care industry. More than a third of the U.S. population has health coverage through an insurer that either wants to make a huge acquisition or is about to be swallowed up in one.The Affordable Care Act has weathered its share of punches in recent weeks, including a Supreme Court challenge that could have led to its unravelling.Aetna will spend about $35 billion to buy rival Humana and become the latest health insurer bulking up on government business as the industry adjusts to the federal health care overhaul.

In the first six months of the year, a record $296 billion in deals have been announced in the industry, according to Dealogic, a research firm that specializes in mergers and acquisitions. In Florida, several big-name insurance providers — including Aetna, Cigna, Coventry and United Healthcare — have already proposed double-digit rate increases for individual health insurance plans, federal records show. The proposed cash-and-stock deal, announced early Friday, 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 transaction values Humana at US$230 per share based on Thursday’s closing price for Hartford, Connecticut-based Aetna, the companies said in a statement yesterday. Aetna will pay approximately $230 a share for the Humana, which is the USA’s second-largest provider of private Medicare insurance — a booming business that has expanded rapidly alongside an aging U.S. population.

That came a day after Centene Corp. and Health Net Inc. announced a smaller deal and a couple of weeks after Anthem Inc. went public with its offer of more than $47 billion for Cigna Corp. The figures are not final, and they represent only a slice of the plans available on the individual insurance market. (Companies requesting single-digit hikes don’t have to publish their rates until later in the year.) But experts are confident they’ll see an upward trend, both in Florida and nationwide. “There are reasons to believe the premiums are going to be higher in 2016,” said Larry Levitt, a senior vice president at the nonpartisan Kaiser Family Foundation. 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.

The nation’s biggest insurer, UnitedHealth Group Inc., also has kicked the tires on making an offer to Aetna Inc., according to The Wall Street Journal. In September, a Republican Party of Florida television ad claimed rates had shot up more than 30 percent in Florida since President Obama’s signature law took hold — a claim rated mostly false by PolitiFact Florida. The combined company will have 2015 revenue of approximately $115 billion, with roughly 56% of that revenue coming from government-sponsored programs such as Medicare and Medicaid. Health insurers routinely detail the earnings and savings they expect from these mega deals, but the impact on the average consumer can’t be boiled down to crisp dollars and cents.

Last year, the average premium for a 40-year-old non-smoking Floridian with a silver plan ticked up 1.8 percent, or about $5, according to a Kaiser analysis. The cynic might argue that a bigger insurer will charge whatever it wants and not sweat losing a few customers because it has millions to spare and less competition.

Friday’s deal comes two years after Aetna completed another push into government business with the $6.9 billion acquisition of Coventry Health Care, which administers Medicaid coverage and offers Medicare Advantage plans. These multibillion-dollar deals offer an infusion of new business at time when growth has slowed in the biggest part of their business, employer-sponsored health coverage.

Cigna Corp last month rejected a US$47 billion bid from Anthem Inc, saying the offer was not in the best interests of shareholders and Anthem executives were not fit to lead a merged insurance giant. Cigna spokesman Joe Mondy said the pricing was based on multiple factors, including “our customers’ full-year 2014 clinical experience and claims payments” and “factors such as the phase out of the government reinsurance program and expectations on the changing risk pool in 2016.” The rate changes won’t be the same for everyone. Insurers are racing to develop better apps and other tools to help their customers buy coverage and health care because patients are being exposed more of the cost of care through rising deductibles and other health insurance expenses.

An estimated 45,700 consumers covered by Cigna, for example, could see their premiums dip by as much as 2.6 percent — or spike as much as 38.3 percent, according to company filings. Some companies, including the state’s largest health insurer, Florida Blue, have not disclosed any information about their 2016 rates because they are not proposing large increases. They also improve their technology and can ultimately save money by combining the back-office functions of two companies and cutting overlapping jobs. These acquisitions still must be approved by shareholders, and regulators have to review them to make sure no company gains an unfair advantage in any market. Explained Florida Blue spokesman Paul Kluding: “Since we filed them as trade secret with the (Office of Insurance Regulation), we cannot publicly discuss (them) until all rates are revealed.” As of Wednesday, the insurer discontinued its low-cost Go Blue plans, which provided few benefits beyond preventative care.

And given minimum benefits that are required in the ACA plans, some will have to pay more than they currently do.” Michael Palin, of New Port Richey, had been paying $79 a month for his wife’s Go Blue plan. Page may also shop around for another plan — something she conceded would be time-consuming given the amount of research she did when selecting her current plan.

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