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Florida Regulators Approve Aetna’s Merger with Humana

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Aetna and Humana, two of the nation’s largest for-profit health insurers, have been seeking governmental permission for their $37 billion nationwide merger. On February 15, the Florida Office of Insurance Regulation approved the deal. This completes 10 of 20 state approvals required for the largest deal ever in the U.S. insurance industry.

Even with this important step, some experts have noted that final approval is not necessarily guaranteed. The Florida attorney general is still reviewing the sale, and federal regulators at the U.S. Department of Justice will have the final word as they further analyze the joining of the companies.

Approved with Conditions
After weighing the merits for several months, Florida’s regulators issued a consent order, approving Aetna’s application to acquire 100 percent of the issued and outstanding voting securities of Humana Health Insurance Company of Florida, Inc.; Humana Medical Plan, Inc.; Careplus Health Plans, Inc. and CompBenefits Corporation.

Regarding concerns over decreasing market concentration, the Office of Insurance Regulation considered divestiture of policies or affiliates. They determined that was “not in the best interest of the policyholders” since it “may be disruptive…[forcing them] to replace their chosen providers…and may also result in unwanted changes in quality of services, benefits, and the cost-sharing structure of their plan.” More than one million Floridians covered by Humana and CarePlus health plans

However, the consent order did impose several important conditions for the deal:

Aetna must sell Affordable Care Act exchange plans and expand into five more Florida counties by 2018. (For 2016, Aetna offers five plans on the ACA exchange while Humana offers 40 plans.)
Aetna must comply with a three-year requirement to document the efficiencies of the new combined company.
Aetna must maintain “fair treatment” of individuals living with HIV by guaranteeing that coverage policies for HIV/AIDS drugs will extend to all Humana plans.
Aetna must provide a plan for statewide expansion by 2020.

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Effect on Medicare and Medicare Advantage
Florida has the second-highest number of Medicare insured in the United States, and the proposed transaction would give Aetna ownership of Humana’s large stake in government-sponsored insurance programs.

In Florida’s consent order, one of the key findings indicates essential agreement with Aetna that Medicare Advantage competes directly with traditional Medicare. As a result, they claim the combined company would only cover 8 percent of all Medicare beneficiaries and would not constitute an antitrust issue.

However, the federal government is taking a much closer look at the merger, carefully examining how traditional Medicare competes with Medicare Advantage, how geographic markets are defined, how difficult it would be for companies to enter Aetna’s markets and whether overlap problems can be sufficiently solved by divestitures.
Concerns Over Monopoly
In addition to issues relating to Medicare, there is further dissent with the decision of the Office of Insurance Regulation. The deal has come under intense scrutiny by many antitrust experts. Prior to Florida’s recent approval, nine consumer advocacy and union groups formed a coalition, urging regulators to deny the deal.

The transaction would reduce the number of nationwide health insurers from five to three. The coalition insists this would lead to a decrease in competition and a reduction in consumer choice and could lead to higher premiums.

Representatives from the two insurers argue they expect to save $1.25 billion by 2019 through their proposed merger. These savings would be passed on to consumers through lowered costs. Additionally, the companies insist their combined expertise will help them serve customers better.

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As the Aetna-Humana deal—and others, such as the Anthem-Cigna deal—move forward, healthcare providers, unions and consumer groups continue to raise concerns. For example, as a result of these two mergers, four companies—Florida Blue, UnitedHealth, Aetna, and Anthem—would control nearly ninety percent of the Florida commercial market.

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