California, U.S.- The California Department of Managed Health Care approved Monday Aetna Inc takeover of Humana Inc. The merger implies $37 billion but the approval came with some conditions.
To close the deal, the Aetna-Humana merger still needs approval from 4 more states and the U.S. Department of Justice.
Shelley Rouillard, the director of the California Department of Managed Health Care (CDMHC), made public his decision on Monday, but some conditions apply to the permission.
According to the statement of the CDMHC, to control costs and expand access to health care in the state of California, the department established some conditions to the takeover. Aetna has to invest about $50 million in consumer assistance programs in the state, telehealth services, care organizations, dental services for low-income citizens and underserved communities,and the expansion of their services in Fresno, California.
Aetna also agreed to limit health maintenance organization small group premium increases and to oversight for insurance rate reviews, Business insurance report.
L.A. Times says that on Monday, Aetna shares rose 1 percent to close at $122.34 and shares of Louisville, Ky.-based Humana reach 1.5 percent to $189.90.
The website Business Insurance said that through an email, an Aetna spokesman said this announcement was the latest positive step in the approval process as they move closer to a combined company. He added they continue to expect that the transaction will be closed in the second half of 2016.
This deal between Aetna-Humana has high chances to be closing versus the Anthem-Cigna merger.
Why is the Aetna-Humana merger more likely to be approved than the Anthem-Cigna merger?
Commissioner Dave Jones, from California Insurance, asked the Justice Department to block the possible merger between Anthem Inc. and Cigna Corp, both insurance companies. Commissioner Jones said the takeover was harmful to the state consumers and business, according to Business Insurance.
Aetna and Humana do not compete in similar markets, Aetna does not deal with Medicare and Humana mostly does. But in the case of Anthem and Cigna, the union would be a private sector campaign. Both companies compete in the same field and their combination could affect competition in that market, several analysts have said.
According to Bloomberg, Anthem is the biggest private health insurer in the country, and its union with Cigna will leave out smaller rivals off the market. They will have the advantage in courting clients.
Anthem’s enrollment was around 31 million at the end of 2015, and if the takeover is approved, the company could reach 45 million.
The Anthem-Cigna deal needs to be approved by 26 states, and it had only been accepted in 12 states. The California Department of Managed Health Care has not approved the takeover.
Business Insurance says on its website that analyst Ana Gupte, from Leerink Partners L.L.C., states that the Anthem-Cigna merger has less than 50 percent chances to close the deal while Aetna-Humana has 80 percent chances.
Both proposals were announced last summer because the companies alleged that without any alliance these insurances will suffer disadvantages in the market regarding larger rivals.
Source: Business Insurance