Merger madness continues: Aetna close to acquiring Humana

Buoyed by the Supreme Court's decision to uphold federal health insurance subsidies, the country's largest insurers have once again set their sights on consolidation.

Aetna now is close to buying Humana, and a deal could emerge as early as this weekend, Bloomberg reports. Humana, a ripe acquisition target due to its large share of Medicare Advantage enrollees, has sought suitors for months, but recently entered a quiet period after merger rumors reached a fever pitch, FierceHealthPayer previously reported.

Talks between Aetna and Humana intensified recently amid news of Anthem's accelerating effort to take over Cigna, according to Bloomberg. The potential Anthem-Cigna merger stalled, however, after Anthem made its bid for its fellow insurer public and Cigna publicly rebuked its offer in return.

At the same time, UnitedHealth reportedly had made overtures to Aetna, which combined with a successful Anthem-Cigna deal, would have left Humana out of the merger frenzy.

It may pay to be the first companies to strike a deal, as government regulators could limit the number of health insurer mergers it allows to occur, according to the New York Times. This fact, combined with the stability that Thursday's King v. Burwell ruling provided and increasing pressures on insurers to cut costs, have made now the optimum time for consolidation in the industry.

If the Court had ruled in favor of the plaintiffs in the latest judicial challenge to the Affordable Care Act, the insurance industry was poised to face a "death spiral" marked by floods of enrollees leaving the market and skyrocketing premiums.

Humana faces some unique challenges in its pursuit of a deal, however. Some experts had said it was priced too high to truly be an attractive acquisition, and according to the Times, the company struggled to meet profit expectations for much of the last year. Furthermore, the article notes, Humana is unlikely to make a deal with the largest for-profit insurer, UnitedHealth, because of the antitrust issues associated with both companies' dominance in the Medicare market.

To learn more:
- read the Bloomberg report
- here's the New York Times article