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Jul 06, 2015

Listen In: Dan Mendelson Talks to NPR About Aetna’s $37 Billion Deal to Buy Rival Humana

Published

Jul 06, 2015

The health insurance company Aetna announced Friday it will buy rival Humana for $37 billion. The merger comes as other health insurers consider consolidating to cut costs.

RACHEL MARTIN, HOST: Aetna, one of the biggest health insurance companies in the U.S., has announced a $37 billion deal to buy its rival Humana. This is a merger that could impact Medicare patients around the country, as NPR's Hansi Lo Wang reports.

HANSI LO WANG, BYLINE: Aetna is buying the country's second largest provider of private Medicare insurance. And Dan Mendelson, CEO of Avalere Health, a firm that tracks health care insurance companies, says it makes sense to him.

DAN MENDELSON: It's the only way to grow because employers have really made a calculation that while to keep insurance, they are spending less on it. So those markets are flat to down a little bit.

WANG: What's on the rise is the government market, specifically Medicare Advantage, which offers privately run versions of the federally funded Medicare plan for seniors and people with disabilities. Medicare Advantage patients do have fewer choices of doctors they can see, but Mendelson says more are going with this private option.

MENDELSON: They're ready to make that trade-off of accepting a narrower network because they get more predictability in their cost.

WANG: There's another part of this growing market for the new combined company. Medicaid, the government insurance program for the poor, has also been expanding under the Affordable Care Act. Last week, the Supreme Court ruled that the federal government can continue offering subsidized health insurance in all 50 states. And Mendelson says that gave a green light to Aetna and the rest of the industry.

MENDELSON: It's told the market, you know, it's OK. Things are going to stay the way they are, more or less, for the foreseeable future, so you can invest with confidence in an organization that has exchange products.

WANG: Aetna and Humana's combined company would serve more than 33 million customers. Jack Hoadley, a professor at Georgetown University's Health Policy Institute, says it would be a powerhouse, influencing health care across the U.S., especially for Medicare patients.

JACK HOADLEY: If they're able to negotiate harder with hospitals and bring hospital prices down, that's one way it could work to the benefit of consumers, but there's a lot of other things that are more concerning.

WANG: Things like whether this combined company means there will be less competition for some consumers. Hoadley says he wouldn't be surprised if other health insurance companies announced mergers in the coming months, and that would mean consumers could have fewer companies to choose from.

HOADLEY: There's going to be a simpler choice to make. You don't have to be picking among a lot of different choices, which can be complicated and confusing.

WANG: But Hoadley is worried that eventually, with fewer choices, it's likely that premiums will rise. Hansi Lo Wang, NPR News.

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