New York Gives Aetna-Humana Merger Green Light with Conditions

By and | July 12, 2016

New York’s insurance regulator has conditionally approved Aetna Inc.’s $37 billion takeover of Humana Inc., one of the last state sign-offs needed for the deal, people familiar with the matter said.

The transaction is still under review by U.S. officials. State insurance regulators have been conducting their own assessments, which are in some cases required before a transaction can proceed.

The New York Department of Financial Services, in a letter sent Monday to Aetna, imposed a number of conditions designed to ensure both Aetna and Humana continue to offer private Medicare options in the state, one of the people said. Overlap in that market, known as Medicare Advantage, has been a major focus of both state and federal officials. The people asked not to be identified because the approval isn’t yet public.

“We now have 90 percent of the required state approvals, which speaks volumes about the deal when you consider health care is delivered locally,” T.J. Crawford, an Aetna spokesman, said by phone. Ciara Marangas, a spokeswoman for the New York regulator, declined to comment.

The main hurdle the deal still faces is gaining approval from federal antitrust officials at the Department of Justice. Aetna had a meeting with antitrust officials on Friday and presented a plan to sell off some assets to maintain competition, a person familiar with the matter said earlier.

New York Finding

New York found that the combination of Aetna and Humana wouldn’t harm competition in the state’s market for health insurance, but is still requiring the companies to offer Medicare products and to not cut benefits.

The New York approval is also conditioned on a sign-off from the U.S.

Humana’s shares declined Monday after a report that Justice Department officials are skeptical that divestitures will help maintain enough competition. The stock fell 2.6 percent to $154 at the close in New York after the report from MLex, a subscription news service that didn’t say where it got the information.

According to the MLex report, Aetna and Humana said they will defend themselves in court if the department sues to block the $37 billion deal on antitrust grounds.

Insurance regulators in Georgia still haven’t weighed in. The state has scheduled a public hearing on the transaction for July 26.

State and federal officials are also reviewing a second massive health insurance deal, Anthem Inc.’s $48 billion takeover of Cigna Corp. That deal is receiving scrutiny for whether it will limit competition in the market for health plans sold to big employers. Together, the two transactions would reduce the ranks of the biggest U.S. health insurers from five to three.

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