Aetna’s Humana deal pressures Cigna to agree on Anthem offer

Humana's updated guidance was consistent with information the company examined during the due diligence process, Aetna Chief Financial Officer Shawn Guertin said on a conference call Monday. 

Scale

Anthem's deal for Cigna would give the companies more scale in commercial coverage, and Anthem has also said that Cigna's Medicare Advantage business is appealing.

The resolution of a Supreme Court case that had threatened a key piece of the Patient Protection and Affordable Care Act has also paved the way for deals. The court's 6-3 ruling on June 25 kept subsidies flowing to help more than 6 million people buy health coverage in the markets created by the health-care overhaul.

Antitrust Hurdle

Still, several deals occurring at the same time can make it tougher to win antitrust approval if officials become worried that too much consolidation can limit consumer choice, according to Allen Grunes, a lawyer at Konkurrenz Group in Washington.

Leslie Overton, a deputy assistant attorney general at the Justice Department's antitrust division, told a conference of health-care lawyers in Washington on June 30 that the department would give insurer mergers a "careful, appropriately thorough analysis" that would consider the evolving marketplace.

"We're looking forward and we're predicting what is going to happen," she said.

Antitrust regulators have become increasingly aggressive, said David Balto, a former attorney at the Federal Trade Commission, which shares antitrust jurisdiction with the Justice Department.

"You need to look at how tough the agencies are getting at merger enforcement," he said. "This is like swimming with the sharks now."

Failed Takeovers

Officials at the FTC and Justice Department have stepped up merger enforcement recently, successfully stopping Sysco Corp.'s takeover of US Foods Inc. and Comcast Corp.'s deal for Time Warner Cable Inc. Regulators last week sued to block Electrolux AB's planned purchase of General Electric Co.'s appliance business.

Competitive concerns are often addressed with divestitures of businesses in individual markets, as occurred when Humana acquired Medicare provider Arcadian Management Services in 2012.

Significant divestitures of Medicare Advantage businesses will likely be required for clearance of the Aetna-Humana deal, possibly in hundreds of counties, Bloomberg Intelligence analyst Jennifer Rie said.

The most significant overlaps appear to be in counties in Southern and Midwestern states, including Florida, Texas, Kentucky, Ohio and Missouri, she said.

One smaller health deal is already in the works. Centene Corp. agreed on Thursday to buy Health Net Inc. for about $6.3 billion, creating the biggest private administrator of Medicaid, the U.S. health program for the poor.

Aetna would have to pay Humana a $1 billion breakup fee if the deal falls apart because of regulatory scrutiny, according to Aetna spokeswoman Cynthia Michener. Aetna Chief Financial Officer Shawn Guertin said the companies have examined how their businesses overlap and declined to comment in detail on regulatory scrutiny.

"Obviously it's something that we think is manageable," he said on Friday. "At this point, we're certainly glad that we got this done and that we're going to be the ones to go through the process first."