Aetna to Buy Humana for $37 Billion

The Wall Street Journal

Aetna Inc. on Friday said it would buy Humana Inc. for $37 billion, following weeks of frenzied merger talks among the largest health insurers. The deal vaults Aetna toward the top of the US Medicare business. In a statement, Aetna said it would pay about $230 a share for Humana. The price represents a premium of 23% from July 2nd’s close.

A takeover approach for Humana earlier this year thrust the biggest health-insurance companies into a five-way merger frenzy. Cigna and Aetna were vying to buy Humana, while fielding takeover approaches of their own. Cigna and Anthem have now rekindled talks after Cigna earlier rejected a public $184-a-share takeover bid from Anthem.  UnitedHealth earlier approached Aetna. In the Medicaid market, Medicaid-focused Centene Corp. on July 2nd said it agreed to buy Health Net Inc., in a deal worth about $6.3 billion.

The consolidation momentum in the health-insurance industry is being fed by a desire to diversify and cut costs, amid a landscape changed by the Affordable Care Act. Insurers are eager to reduce expenses and build scale that will help them face off against health-care providers that are bulking up.

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Expected scrutiny from antitrust regulators, along with signs of some emerging operational challenges at Humana, will put pressure on Aetna and its chief executive, Mark Bertolini, to demonstrate that the huge bet will pay off. Following the deal’s closing, Mr. Bertolini will serve as the chairman and chief executive of the combined company.

In picking up Humana, Aetna would get a powerful asset, a company with a rapidly growing Medicare enrollment that totals 3.2 million, which, combined with Aetna’s Medicare membership of 1.26 million, would give the merged company the biggest market share in the program, ahead of current leader UnitedHealth Group. The Medicare business is seen as a growth engine for the industry, as baby boomers age into eligibility and choose the private-insurer version of the government program, known as Medicare Advantage plans.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

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Kirk Reinitz, CPA
President/CEO