An acquisition by Aetna would bring an end to the half-century of radical company makeovers by Humana and create an insurance giant in the fast-growing market for government-subsidized health plans.
Louisville, Ky.-based Humana—a $23 billion company that began as a single nursing home in 1961 founded by David Jones and Wendell Cherry—is the second-largest player in Medicare Advantage, Medicare's private managed-care option that has seen enrollment triple in the past decade. That program will continue to grow, with a surge of baby boomers entering Medicare.
The deal, valued at $37 billion, would give Aetna access to technology and ancillary services acquired and developed by Humana to manage the cost and quality of care for chronically ill Medicare beneficiaries.
Humana has invested in care-coordination programs, employs nurses and care coordinators, and has a network of clinics that specialize in coordinating care for seniors. Humana's strength in the Medicare Advantage market, with its focus on retail customers, also could help Aetna shift to the consumer focus that many experts predict is the future of health insurance.
Medicare Advantage “is a very important part of our business because (it) encourages competition, value-based reimbursement and looking at individual members holistically,” Humana CEO Bruce Broussard said in an interview with Modern Healthcare this year. “It's a perfect example of where the consumer is making the choice. Providers are incentivized around quality and cost, and that forces integration.”
Humana has bought—and shed—companies in the past few years to bolster its Medicare business, including the $1 billion sale of Concentra in June. It continues to expand and is now the most widely available Medicare Advantage option nationally, with the broadest number of health plan choices, according to a Kaiser Family Foundation analysis.
Analysts say Humana would benefit from the deal, which would result in a more diversified company. Humana has limited business in the commercial-insurance market, which accounts for nearly two-thirds of Aetna's business when the company's administrative services contracts for self-insured employers are included. Commercial and administrative contracts account for one-quarter of Humana's business.