Aetna Inc.’s $37 billion deal to buy smaller health insurer Humana Inc. will face rigorous scrutiny from U.S. regulators, which antitrust experts said may possibly also make other large-scale mergers within the sector more challenging.
The Aetna-Humana tie-up could be the largest such deal among health insurers. Friday’s announcement starts the clock while on an examination by regulators of whether consumers will be hurt by diminished competition. Competition regulators are the Department of Justice and various state-level agencies.
The offer follows weeks of intense discussions about potential combinations among the five biggest U.S. health insurers: Aetna, Humana, Cigna Corp., Anthem Inc and UnitedHealth Group.
Insurers want more leverage inside a healthcare system which includes seen major consolidation among hospitals and doctor practices, and also mergers between medical device makers and also other suppliers. The money necessary for new drugs has soared, and President Obama’s healthcare law has made it tougher for insurers to pass through on higher costs to customers.
Last month, Anthem provided to buy Cigna for $47 billion. The combined company might have surpassed UnitedHealth to get the only largest U.S. health insurer.
Cigna, that have also considered purchasing Humana, has thus far rejected the buyout approach. Some industry watchers expect a potential buyout of Cigna being revived after Aetna’s deal.
Industry sources said Cigna and Anthem might have just a couple months to sign a great deal if they like it to be regarded by antitrust authorities with the Aetna-Humana deal.
Cigna declined to comment concerning the Aetna-Humana deal. Anthem said hello had nothing to say about other potential mergers.
Regulators “really should be exceedingly skeptical with this deal” between Aetna and Humana, said Diana Moss, president with the American Antritrust Institute. “Determined by who merges as well as the exchange signal of the marketplace structure, that affects the concerns regarding the competition.”
Aetna said hello is just about to address regulatory concerns.
“Obviously this really is a thing that we expect will receive a thorough and careful review,” Shawn Guertin, Aetna’s chief financial officer, said within an interview. “We’ve spent time considering this at the fairly detailed level, and then we certainly feel that’s a manageable situation.”
Guertin conceded that your combined company could have some overlap, but declined to possible divestitures that regulators might seek.
“We’re within the same business with the highest level, and thus there is really an overlap in that regard,” he explained.
“It’s really about local markets,” Guertin said.
Antitrust experts said a regulatory writeup on Aetna and Humana might also aspect in whether there is another major deal in the profession.
Regulators are expected to scrutinize how competition in local markets are going to be affected for each and every brand of insurance: Medicare with the elderly, Medicaid to the poor, individual insurance, commercial insurance for small and large business plus the large employer business.
Regulators have recently scuttled deals in other industries that may have formulated mega players. In April, Comcast Corp. abandoned its $45 billion offer for Time Warner Cable Inc. because of antitrust worries.
This month, the U.S. Justice Department sued to quit Sweden’s Electrolux AB from buying General Electric Co.’s appliance business.
“Agencies have become increasingly skeptical about whether you'll be able to remedy anti-competitive mergers insurance agencies a divestiture,” said David Balto, formerly a policy director of the Bureau of Competition with the Federal Trade Commission.
Mergers might give insurers more punch to negotiate less expensive costs with pharmaceutical companies, Balto said. But he called a “Faustian bargain.”
“Maybe they have more buying power, on the other hand they’re likely to have more selling power.”