Aetna Plans to Divest Assets To Smooth Way for Merger, But Divestitures Will Not Fix Problems

July 7, 2016

 

Health insurer Aetna is preparing to sell substantial assets in order to quell regulatory concerns over its $37 billion takeover of Humana. The company is working to advisors to identify a portfolio of assets that can be divested and that reduce any significant overlap between its operations and Humana’s operations. There are conflicting reports about these assets; some say they will likely be valued at about $1 billion, while others say they could be worth several billion.

 

DOJ and the courts should reject Aetna’s attempt to salvage their deal. Even $1 billion in divestitures is nothing compared to the assets Aetna would need to sell to adequately restore competition. The AHA has observed that the necessary divestitures for this merger would be over 1.8 million subscribers in 368 counties. Additionally, the costs of the divestitures in disrupted service, higher premiums, uncertainty, and inferior service will be borne by consumers. Especially for the Aetna-Humana merger, the most vulnerable consumers – elderly and disabled Medicare beneficiaries – will predictably suffer the greatest harm. There is no reason that seniors should be forced to bear the costs of a wide-ranging, risky settlement—especially when the merger will only benefit Aetna and Humana shareholders and executives.

 

Any divestitures would be dependent on the Aetna-Humana merger actually being approved. State and federal regulators, provider groups, legislators, and consumer advocates have all been skeptical of or opposed this merger. Reports have also shown that the Medicare Advantage market, which the merger would greatly impact, is already highly concentrated and that divestitures will not solve the anticompetitive problems posed by the merger.  

 

Competition between Aetna and Humana in Medicare Advantage makes a big difference. A Center for American Progress study found that when they compete head-to-head in Medicare Advantage consumers win – Aetna premiums are $302 lower and Humana premiums are $43 lower.  And Aetna is growing fast; the number of counties where they fight against Humana has increased from 82 to 562 in the past three years.   That competition will be extinguished if the merger is approved.

 

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