Insurer Aetna to buy Humana for $37 billion

Aetna’s acquisition of Humana appears to be part of a merger frenzy as the five biggest USA health insurers look to get bigger.

The proposed cash-and-stock deal, announced early Friday, 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. Huge numbers of those invested parties have relatively minor Medicare Advantage operations.

Shares of Aetna and Humana closed at $125.51 and $187.50, respectively on Thursday.

Aetna Chief Executive Officer Mark Bertolini will be chairman and CEO of the combined company.

Regulators “should be exceedingly skeptical of this deal” between Aetna and Humana, said Diana Moss, president of the American Antitrust Institute.

It is estimated that Aetna will be dolling out around $230 per Humana’s share, given the fact that Humana is the second-largest private Medicare insurance provider in the USA. Aetna specializes in commercial coverage, while Humana is a leader in Medicare.

– Increases Aetna’s Medicare Advantage membership to 4.4 million and improves Aetna’s ability to serve members and their providers with cutting-edge technology and best practices.

Humana Inc.’s offerings includes retail, employer group, and healthcare services.

Aetna and Humana will hold a public conference call to discuss the transaction at 8:30 a.m. ET on Monday.

News has it that the third largest and the fourth largest health insurance companies in the region of United States by way of revenues are merging together. Still, it may soon be surpassed. Anthem has put forward a deal to acquire Cigna Corp in order to come up with the largest insurer in the country, bringing down UnitedHealth Group Inc.

A big deal would allow companies to combine the best technology from each company.

Humana’s sale has been anticipated since May when it was first reported that Cigna Corp and Aetna were interested, and multiple sources confirmed to Reuters that the company was entertaining offers.

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. The 6-3 decision on June 25 in the King v. Burwell case said the US can continue to give people money to help them buy coverage on the federal healthcare.gov website.

Furthermore, the acquisition deal is also expected to be significantly accretive to Aetna’s operating earnings in 2017, according to the company.

Overall, the merged firm will receive about $63 billion in revenue from the government’s Medicare and Medicaid programs this year (about 56 percent of total revenue).

Antitrust experts said a regulatory review of Aetna and Humana could also factor in whether there is another major deal in the industry.

Aetna announced its deal a day after the Medicaid coverage provider Centene said it will spend $6.3billion to buy fellow insurer Health Net.