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 Mark Bertolini said Aetna had already prepared for possible
divestitures to address overlaps with Humana's business in the
largest-ever U.S. health insurance deal. The two sides announced the
$37 billion transaction on Friday. Hospital and state officials said
they would take a hard look at whether the deal would diminish
competition for consumers.
"We took a conservative view of what we would need to divest,"
Bertolini said during an investor conference call.
Aetna has not discussed the deal directly with the U.S. Department
of Justice, but has consulted with regulatory experts, Bertolini
told cable channel CNBC.
"We believe that given the legal advice we have...that this is a
very manageable transaction," he said.
The bigger the insurer, the more power it has negotiating prices
with hospitals and other providers, as well as improving its doctor
networks.
Aetna and Humana are in nine of the same states in one of their key
businesses - Medicare Advantage plans for the elderly. Combined,
they would have market share of 88 percent in Kansas, 80 percent in
West Virginia, 58 percent in Iowa and 51 percent in Missouri.
Regulators would also look for the impact on competition in each
local market for the companies' Medicaid plans for the poor,
individual insurance, commercial insurance for small and large
businesses and the large employer business.
Attorneys general in several U.S. states said on Monday they would
be ready to review the proposed deal.
"Our office is aware of these mergers, and we will be looking to
determine whether or not there's any significant impact on
Massachusetts," said Chloe Gotsis, a spokeswoman for the state AG's
office.
Healthcare providers are concerned that further consolidation will
decrease competition in the insurance industry, said Alicia
Mitchell, spokeswoman for the American Hospital Association.
"Any potential deal of this magnitude needs rigorous scrutiny.
That's why the AHA will call upon the DOJ and Congress to exercise a
significant level of scrutiny,” Mitchell said in an emailed
statement.
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Health insurers have been in a race to consolidate, saying that
being larger would help them negotiate better prices with doctors
and hospitals as well as cut administrative costs.
No. 2 health insurer Anthem Inc has offered to buy No. 5 Cigna Corp.
The two companies have revived discussions in light of the
Humana-Aetna deal, though it is not clear whether they can agree on
terms including price and governance issues, sources familiar with
the matter have told Reuters.
If an Anthem-Cigna deal is announced within the next two to three
months, regulators could look at the impact of both mergers at the
same time, Bertolini said.
"It really depends on whether or not any other deals are announced,"
he told investors. "Currently we anticipate that our transaction
will be viewed alone at this point in time, but they could be
bundled together at some point."
Aetna shares fell 6.4 percent to $117.43 on Monday as investors took
stock of the regulatory and financial risks of the deal. Humana also
lowered its 2015 financial forecasts, citing higher than expected
expenses in its Medicare business.
Humana shares closed up 0.8 percent at $188.96, well below the value
of Aetna's proposed cash and stock offer of $223, based on the most
recent share prices.
(Reporting by Caroline Humer in New York; Additional reporting by
Greg Roumeliotis, Susan Kelly and Karen Freifeld; Editing by
Bernadette Baum and Christian Plumb)
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