Health insurer Aetna Inc on Friday said it would buy smaller rival Humana Inc for about $37 billion in cash and stock, in the largest ever deal in the insurance industry.
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Aetna and Humana still need federal approval. Based upon all the information available, I am cautiously optimistic that this merger will be a net positive for Louisville and the Commonwealth.
“I think it’s very fair to speculate that it will lead to more jobs”, Mayor Greg Fischer said of the deal. Humana employs more than 12,000 residents in the Louisville area; its foundation is a philanthropic pillar in the community. For each share, Humana stockholders will receive $125 in cash and 0.8375 Aetna common shares, and will end up owning about 26 percent of the combined company.
“U.S. health insurers have successfully managed challenges from the rollout of the Affordable Care Act”, Moody’s declared in February, raising its outlook on insurers from “negative” to “stable”. The combination will provide Aetna with an enhanced ability to work with providers and create value-based payment agreements that result in better care to consumers, and spread cutting-edge clinical practices and quality care. The combined company would have projected 2015 operating revenue of about $115 billion, with about 56% coming from government-sponsored programs like Medicare and Medicaid.
According to The Courier-Journal (http://cjky.it/1GVakeI), CEOs of both companies said the company’s presence in Louisville will be more robust, growing from $50 billion today to $60 billion under the arrangement.
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.
“Government markets are the most rapidly growing aspect of the system”, said Dan Mendelson, chief executive of the market research firm Avalere Health.
The deal includes a $1 billion break-up fee payable by Aetna to Humana, should the deal fail because of antitrust concerns, an Aetna spokeswoman confirmed.
Regulators “should be exceedingly skeptical of this deal” between Aetna and Humana, said Diana Moss, president of the American Antritrust Institute.
The Aetna-Humana tie-up would be the largest such deal among health insurers.
While the law was an “action forcing event”, Bertolini said both Humana and Aetna were making investments before Obamacare took effect to simplify relationships with health care providers and improve technology.
“The acquisition of Humana aligns two great companies and will significantly advance our strategy of more effectively serving members in a rapidly changing healthcare industry”, said Aetna Chairman and CEO Mark T. Bertolini. That means using tools that tell them if a patient is sticking with a prescription or keeping up with follow-up care. “These mergers do, however, ultimately benefit investors and management of the companies”.
Brings together two companies with longstanding commitments to promoting wellness, health, and access to high-quality health care for everyone, while supporting the communities in which they serve. Aetna and Humana have seen their stock valuations triple in the past five years, since the ACA was signed into law, and the other three major insurers also have seen huge gains.
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But Aetna and Humana already are giant, scaled entities.
