The merger between Aetna and Humana moved one step closer to the finish line Monday as shareholders from both companies voted to approve the deal. Shareholders gave their overwhelming approval to the transaction with 99% of the votes in Connecticut and New York cast in favor of the deal.
Aetna shareholders voted in the early afternoon with Humana shareholders voting two hours later.
The vote came less than two weeks after Humana settled a class-action shareholder lawsuit challenging the deal. The government-focused managed-care company agreed to provide additional background information on the $37 billion merger to settle the litigation.
Humana was trading midday at about $186 a share, below the $230 per share offer.
Two proxy advisory firms, Institutional Shareholder Services and Glass Lewis, had given their blessing to the deal. The firms did not respond to a request for comment.
Even with the go-ahead from shareholders, the companies will still need to get past antitrust regulators. The U.S. Justice Department has already issued a second request for more information on the transaction.
Aetna CEO Mark Bertolini faced a hearing last month in front of the Senate Judiciary Committee's antitrust subcommittee along with Anthem CEO Joseph Swedish, whose company is trying to buy Cigna in a $54 billion deal.
Although many observers say the deals will face a tough antitrust review, analyst A.J. Rice at UBS described the congressional hearing as being “relatively straightforward without significant fireworks.”
If the deals are allowed to proceed, they are likely to change the landscape for providers and create additional leverage for insurers in negotiating contract terms. Providers are particularly concerned about being left out of narrow networks in markets with limited insurance competition.
“The power of the insurers is becoming ever stronger,” said Dr. Bill Bithoney, managing director at BDO Consulting and former chief medical officer for several large health systems. “The risk of being excluded from the network is a real danger.”
The majority of markets have just three or fewer insurance carriers, he noted.
The American Medical Association released a study last month showing that the two mergers combined would reduce competition in 154 markets in 23 states. Aetna's merger with Humana would reduce competition in 58 metropolitan areas in 14 states, while Anthem's tie-up with Cigna would diminish competition in 111 metropolitan areas in 14 states.
“Everyone's afraid,” Bithoney said, adding that health systems are likely to pursue their own mergers in response. “It's an ever-escalating merger-mania.”
On recent earnings calls, health systems have faced questions from concerned bondholders about the potential impact of the insurance consolidation.
Fielding one such question, Banner Health's chief financial officer, Dennis Dahlen, expressed confidence in the system's relationship with Aetna and said it is somewhat more concerned about the Cigna takeover.
“We're not overly anxious, but we're attentive,” he said on an August call. “We're relevant in the markets they're in and that blunts the advantage of size and scale. That said, it's game on.”