Corporate Law Blog

Regulators likely to heavily scrutinize proposed Humana-Aetna merger

At the beginning of the month, insurance companies Aetna Inc. and Humana Inc. announced they would be pursuing a merger, with the former company acquiring the latter. Aetna, sources say, will be purchasing Humana for roughly $230 per share, and the total deal is valued at $37 billion.

The announcement comes after months of talks between major health insurance companies about pursuing mergers, indicating a trend toward consolidation in the health insurance industry. What’s behind this, say commentators, is an eagerness to reduce costs and expand offerings in light of changes initiated by the Affordable Care Act.  

As we’ve previously mentioned on this blog, businesses can and do sometimes have to deal with roadblocks from regulators in pursuing mergers and acquisitions. It is known that the Department of Justice—one of the agencies responsible for reviewing merger propositions—is going to be very cautious in scrutinizing mergers among health insurance companies. The concern, of course, is that over-consolidation could lead to lack of competition and antitrust issues.

One of the potential hang-ups in the Aetna-Humana merger is that the insurer has a significant influence upon the insurance exchange systems established by the Affordable Care Act. According to the Wall Street Journal, the number of counties in the United States where at least 75 percent of Medicare Advantage customers only have a single option for an insurer would increase by 180. So, the concern over reduced competition is not insignificant.

As we’ve written before, dealing with the regulatory challenges presented by mergers is not easy for businesses, and having the guidance of an experienced attorney can be critical to ensuring the success of a deal.