Senate Majority Leader Mitch McConnell slammed the billion merger of Aetna and Humana on Friday, saying it confirmed his predictions that Obamacare would lead to such consolidation among health insurers – and eventually to fewer options for Americans.
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The Connecticut-based Aetna will pay the equivalent of $230 per share in cash and stock, a 21 per cent premium to Humana’s closing price on Thursday. “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”.
Analysts say the federal health care overhaul has pushed the insurers to consolidate, and a big deal has been expected for weeks.
Humana shareholders will receive $125 in cash and 0.8375 of an Aetna share for each of Humana’s.
According to Bloomberg, Anthem may offer Cigna a better deal than the $47 billion takeover bid that Cigna rejected last month, and UnitedHealth may try to buy Aetna.
Consolidation among giant insurers “reminds me of the airline sector, and I don’t think there have been efficiencies gained there – and they have a more direct way of finding efficiencies, with the hub-and-spoke model”, Robert Town, a health care professor at the Wharton School, told me last week. Health care costs and the amount of competition an insurer faces can vary widely depending the market.
Major acquisitions can offer an infusion of new business at a time when growth has slowed in the biggest part of their business, employer-sponsored health coverage. The combined company would be the second-largest managed care company in the USA, only behind UnitedHealth Group Incorporated (NYSE/UNH).
A completed deal also would mark the end of Humana as a stand-alone company, where it has always been a prominent name in the health industry and a key presence in its hometown, Louisville.
If Aetna’s plan to purchase Humana becomes official, what was Louisville’s largest standalone publicly traded company by revenue will cease to exist as the city has known it.
It’s also the latest major merger in an increasingly frantic health care marketplace. That left Aetna with a bigger individual-insurance business, as well as increased Medicare and Medicaid, but it didn’t reshape Aetna the way the Humana acquisition would, tipping a company long known for its employer business far deeper into the government space. “We will be fighting to grow Humana-Aetna’s presence in Louisville”, Fischer said.
“Aetna and Humana share a strong commitment to improving the health and well-being of consumers, whatever their needs and wherever they are on their lifelong health journey”, said Bruce D. Broussard, president and CEO of Humana, said in the announcement.
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Citigroup Inc. and Lazard Ltd. provided financial advice to Aetna, while Davis Polk & Wardwell LLP is acting as legal adviser.
