Several weeks after a federal judge blocked their planned merger on antitrust concerns, health care insurers Aetna and Humana have agreed to abandon the deal.
The decision, announced by Aetna Tuesday morning, also means the Connecticut-based company will not sell off parts of its Medicare Advantage businesses to a smaller insurer, a move meant to assuage federal regulators’ concerns that the merger would reduce competition and consumer choice.
Humana is based in Louisville and employs some 12,000 people in the area. The $37 billion proposed merger would’ve created one of the largest health insurers in the nation, one particularly dominant in Medicare Advantage business.
Aetna will pay Humana $1 billion as a result of the termination of the deal.
“We are disappointed to take this course of action after 19 months of planning, but both companies need to move forward with their respective strategies in order to continue to meet member expectations,” said Aetna Chairman and CEO Mark T. Bertolini. “Our mutual respect for our companies’ capabilities has grown throughout this process, and we remain committed to a shared goal of helping drive the shift to a consumer-centric health care system.”
In January, a U.S. District Court judge ruled against the merger, saying the combined company would lead to higher prices and less choice for consumers seeking Medicare Advantage plans. The Justice Department sued last year seeking to block the deal.
In a statement, Mayor Greg Fischer said the announcement brings needed resolution for both companies.
“Humana has been a world-class company throughout its 56-year-history, and I am extremely confident and enthusiastic about its future as an independent company,” he said. “This announcement provides clarity and signals a tremendous future for Humana and its legacy of civic participation and leadership in Louisville.”
Humana Pulling Out of Obamacare Exchanges
Kentuckians won’t be able to buy a Humana plan on Healthcare.gov for 2018, the company said Tuesday.
Humana coverage was only available in a handful of counties, but the move signals an individual exchange market that is up in the air with the potential repeal of the Affordable Care Act by GOP lawmakers in Congress.
“We really evaluated the exchanges in different lights and one of them was the financial liability of the product,” said Bruce Broussard, president and CEO for Humana. “And I think it’ll be hard for us to get back into that marketplace.”
The news that Humana won’t be appealing the court’s blocking of the merger is likely good for consumers in one regard. A study out from Harvard last month found that while bigger insurance companies often negotiated lower prices from doctor’s offices, those lower prices don’t necessarily get passed on to consumers.
What most likely would have happened is a bump in the monthly charge for insurance, because bigger insurers are able to do this, according to a study from the University of Pennsylvania.
“There’s no evidence that as insurers negotiate lower prices from providers, that those savings are passed on to consumers. In fact, some of the best research on insurer mergers has found that as insurers merge, premiums go up,” said Eric Roberts, postdoctoral fellow at Harvard Medical School.
The Aetna-Humana merger was mainly stopped because of concerns that it would have created something akin to a monopoly in the Medicare Advantage market, which offers private plans to people over 65.
Instead, executives at Humana said Tuesday they’re planning on investing in getting seniors more care at home to slow down chronic diseases.
“This organization needs to stay focused on what we do well, and what we do well is to serve chronic conditions and doing it through our clinical programs,” Broussard said. “And the [exchange plans] program that’s designed today will limit our ability to deliver the true capabilities we have.”
That means Humana could partner with local accountable care organizations, which follow up with patients on things like making doctor’s appointments, wound care after surgery and whether a senior needs to go to a nursing home to avoid the emergency room.