Aetna Announces $37 Billion Merger With Health Insurance Rival Humana

Jul 3, 2015
Originally published on July 3, 2015 12:01 pm

In what could prove the largest-ever merger in the insurance industry, Aetna has announced a $37 billion deal to acquire rival Humana.

The agreement, announced by the Hartford, Conn.-based Aetna, "would bolster Aetna's presence in the state- and federally funded Medicaid program and Tricare coverage for military personnel and their families," according to The Associated Press.

Word of the cash and stock agreement comes a day after Centene said it would pay $6.3 billion to buy Health Net. According to the AP, the Centene-Health Net merger "would help Centene expand in the nation's biggest Medicaid market, California, and give it a Medicare presence in several Western states."

Reuters notes that the deal between Aetna and Humana "will push Aetna close to Anthem Inc.'s No. 2 insurer spot by membership and would nearly triple Aetna's Medicare Advantage business," but adds that the agreement still faces antitrust scrutiny.

In theory, a consolidation of the insurance industry in the wake of Obamacare is supposed to lower costs for consumers. But Forbes quotes Martin Gaynor, a Carnegie Mellon economist and former Federal Trade Commission official, as saying: "It's not clear to me, do they get any more scale economies from getting bigger?"

Forbes also quotes Robert Town, a health care professor at the Wharton School, as saying consolidation among giant insurers reminds him "of the airline sector, and I don't think there have been efficiencies gained there."

"The economies of scale in insurance are relatively modest," Town said.

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