Rivals Lurked Behind Aetna’s Deal With Humana

4 Jul 2015 | Author: | No comments yet »

Insurer merger mania paints muddied picture for consumers.

Two of the biggest US health insurers are to merge, with Aetna paying $37 billion to buy its smaller rival Humana in a deal that continues the rapid consolidation of the country’s healthcare industry.

NEW YORK (Reuters) – Aetna Inc’s $37 billion (24 billion pound) deal to buy smaller health insurer Humana Inc will face rigorous scrutiny from U.S. regulators, which antitrust experts said could also make other large-scale mergers in the sector more difficult.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.

At the same time, they have pushed insurers to bulk up to improve their negotiating position with care providers and drugs companies, which have gained leverage in the expanding market. 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 proposed cash-and-stock deal 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. 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.

Insurers want more leverage in a healthcare system that has seen major consolidation among hospitals and doctor practices, as well as mergers between medical device makers and other suppliers. 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.

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.

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. Industry sources said Cigna and Anthem may have just a few months to sign a deal if they want it to be considered by antitrust authorities along with the Aetna-Humana deal. 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. In April, Comcast Corp abandoned its $45 billion offer for Time Warner Cable Inc because of antitrust worries. “Agencies are becoming increasingly skeptical about whether you can remedy anti-competitive mergers by having some kind of divestiture,” said David Balto, formerly the policy director of the Bureau of Competition of the Federal Trade Commission. 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.

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.

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