Humana Will Quit ACA ExchangeFebruary 15, 2017 |
by The Associated Press
Health insurer Humana is leaving the Affordable Care Act’s public insurance exchanges for next year as it regroups after cancelling ending its proposed combination with rival insurer Aetna.
Humana Inc. covers about 150,000 people on exchanges in 11 states.
The insurer said on February 14 that it had taken several actions to improve that business, but it was still seeing signs of unbalanced risk in that customer population. Health insurers have struggled to attract enough healthy people to their risk pools to balance the claims they incur from people with expensive medical conditions.
Humana and Aetna said earlier the same day that they were calling off Aetna’s roughly $34 billion acquisition of Humana. That deal already had been rejected by a federal judge who was worried about its impact on competition.
The announcement came several days after another federal judge shot down a tie-up between two other massive insurers. Blue Cross-Blue Shield carrier Anthem Inc. is attempting to buy Cigna Corp. for $48 billion. Anthem is appealing that decision.
Aetna, the nation’s third largest insurer, had announced its bid for Humana in 2015. The deal would have given Aetna the opportunity to expand significantly its presence in Medicare Advantage coverage, which involves privately run versions of the federal Medicare program for people who are over 65 or disabled.
But Aetna’s attempt to gobble up the nation’s fifth largest health insurer brought in the Department of Justice, which sued last summer to block that deal and the Anthem-Cigna combination.
Regulators worried, in particular, about how the Aetna-Humana deal would affect consumer choices and competition in the fast-growing market for Medicare Advantage plans.
U.S. District Judge John Bates wrote in the decision last month that neither new competition nor plans to shed some of the combined company’s businesses would be enough to ease antitrust concerns. Federal regulation would likely be “insufficient to prevent the merged firm from raising prices or reducing benefits,” Bates ruled.
Aetna Chairman and CEO Mark Bertolini said in a company release that “the current environment makes it too challenging to continue pursuing the transaction.”
Humana is entitled to a $1 billion breakup fee, which would amount to about $630 million after taxes. The Louisville, Kentucky, insurer said it would announce its 2017 forecast and provide an update on its strategic plan after markets closed February 14.
The two deals blocked in federal courts would have melded the nation’s five largest insurers into three, with UnitedHealth Group Inc. currently the biggest.
The insurers have argued that growing through acquisitions would allow them to better negotiate prices with pharmaceutical companies, hospitals and doctor groups that also are merging and growing larger. They also expect to cut expenses and add more customers, which helps them spread out the cost of investing in technology to manage and improve care.
Insurers have also said that combining would help them stabilize their business on the Affordable Care Act’s public insurance exchanges.
But the American Medical Association said last week, after the Anthem-Cigna deal was shot down, that a merger would have created a health care behemoth too large to regulate and with too much control over the lives of consumers.