It was recently announced that the Hartford-based Aetna will shell out nearly $40 billion in order to purchase Humana, establishing itself as the second-biggest insurer in the expanding Medicare Advantage business, which consists of private offerings of the government-run health care program.
The move, if approved, will serve to strengthen Aetna’s role within government-sponsored Medicaid program, as well as the coverage of veterans and military families.
The announcement of the proposed deal came in the wake of other major news from the industry. Centene announced it is planning to pay upwards of $6 billion to purchase its competitor Health Net. If it comes to fruition, Centene should become a major player in the state of California’s Medicaid market, which is the largest in the United States. It will also allow Centene the ability to secure a foothold in a few other west coast states.
Industry figures note that such moves make sense as Government markets are the fastest growing area of the entire system.
Just two years ago, Aetna made a similar move with its $7 billion purchase of Coventry Health Care. Mergers and acquisitions seem to be the norm right now as Health Insurers are attempting to consolidate. Anthem announced in June that it was planning to acquire Cigna for over $47 billion. Although Cigna initially rejected the deal, the two parties are still in the midst of negotiations according to WSJ.
The wave of billion-dollar mergers have occurred as growth in employer-sponsored health coverage has stagnated for many of these corporations. A merger, to them, is an easy way to generate new business. These mergers also provide an avenue through which these corporations can move towards diversification with regards to their product offerings and geography. Furthermore, the joining of two companies should eventually cut costs as jobs with overlapping functions will be cut.