If Aetna and Humana win the approval of the federal judge who will rule on their case, they said they would sell assets representing about 290,000 Medicare Advantage enrollees in 21 states to Molina, a largely Medicaid-focused insurer.
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Aetna Inc. said on Tuesday that it no longer planned to expand its Obamacare business next year, and the USA health insurer announced the sale of some Medicare Advantage assets as it fights to gain antitrust regulators’ approval for its takeover of Humana Inc.
Humana and Aetna are fighting a Justice Department suit that seeks to block their $34 billion deal. The American Medical Association has also criticized the proposed merger, saying it would reduce competition in Louisiana. Aetna is attempting to purchase Humana, which the Department of Justice is contesting due to concerns of its impact to competition. Molina Healthcare is likely to pay about $117 million in cash consideration to both the insurers based on the expected number of members, or 290,000 Medicare memberships, to Molina Healthcare in 21 U.S. states.
The insurer also said it will sell coverage on Affordable Care Act individual exchanges in 11 states next year, down from 15 this year.
The nation’s third largest insurer said Tuesday that significant challenges faced by the state-based exchanges are forcing the company to withdraw expansion its plans and think about its future participation in the 15 states where it now sells coverage.
Aetna said it would re-evaluate its participation in the 15 state exchanges where it now sells plans, and cancel a planned expansion into more. He noted a number of the Blue insurers are themselves losing money on the exchange business.
But Humana exceeded analysts’ expectations with adjusted earnings – which exclude things like the $61 million Humana has spent so far this year on its merger with Aetna – of $2.30 per share, according to Reuters. The final rates for 2017 are still not approved, but the data released late Monday night on healthcare.gov predicts relatively small increases for the state’s two largest insurers, Anthem and Harvard Pilgrim, and much larger increases for Minuteman and Maine Community Health Options.
Shawn M. Guertin, Aetna’s executive vice president and chief financial officer, said the sale would include “network continuity” to prevent interruptions in customer service and to give Molina time to ramp up to take over the business.
On its conference call, the company said it expects an annual loss on its ACA business “in excess of $300 million”. Other sector players such as, UnitedHealth Group Inc. and Humana have disclosed their projected year-end 2016 losses on the ACA plans and may conclude their ACA businesses in states next year.
Aetna shares climbed $1.25 to $115.6 in midday trading Tuesday, while broader indexes slipped. It also addresses a key concern of the U.S. Department of Justice in its challenge to the Aetna-Humana transaction.
Analysts expected earnings of $2.11 per share on average, according to Zacks Investment Research.
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The health insurer posted revenue of $14.01 billion in the period, which topped the average Wall Street forecast for $13.63 billion.
