Aetna's decision to merge with Humana is not only driven by the smaller company's dominance in Medicare Advantage (MA) business, but also its strong understanding of the consumer-centric trend that has come to dominate the health insurance industry, Aetna CEO Mark Bertolini tells Bloomberg.
The Affordable Care Act has fundamentally changed the game for health insurers, Bertolini (pictured right) says during an interview with the news outlet. "It's no longer about creating balanced risk pools across markets. It's taking on risk appropriately, getting paid to manage that risk and getting a positive outcome," he says.
And one of the companies that has had the most success adapting to that new reality is Aetna's acquisition target Humana, Bertolini continues. "When we combine their capabilities and ours, we become very strong in the retail marketplace, the individual marketplace."
Humana's large share of MA business also is a "powerful" motivation for the deal, Bertolini acknowledges. Indeed, though many insurers thought MA enrollment would decline with passage of the ACA, it jumped from 11 million in 2010 to 16.6 million so far, and is expected to balloon even further as multitudes of baby boomers enter retirement age.
Aetna can't take advantage of these benefits, however, if the Department of Justice (DOJ) blocks its deal. To that end, Bertolini says that if regulators look at how the deal will affect customers at the local market level, they will discover the consolidation won't squash competition as much as some fear. Overall, an Aetna-Humana combined company would control only 8 percent of the Medicare market, he points out, so the combined company would hardly have a monopoly in MA business.
Like fellow merging insurers Anthem and Cigna, Aetna and Humana are currently in talks with the DOJ regarding their deal, sharing data and analyses about how it would affect the market, Bertolini says. The next steps will be to determine where, if anywhere, either company needs to make divestitures in order to ensure the market remains competitive.
Bertolini had hoped that Aetna and Humana would have a slight advantage in the regulatory process because they announced their deal first, though after Anthem and Cigna announced their merger many expected both deals to be scrutinized concurrently.
Still, "I think they're very different deals on their own merits, and I think that's how they'll be evaluated at some level," Bertolini tells Bloomberg.
To learn more:
- watch the interview
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