Ritter Insurance Marketing, Craig Ritter

Divestiture to Molina Could Sway Aetna-Humana Merger

Aetna and Humana responded to antitrust concerns over their merger with a plan to sell off $117 million of their Medicare Advantage (MA) assets. Molina Healthcare has agreed to purchase the holdings, pending successful completion of the merger.

Aetna Humana Divestiture StatesMolina would gain nearly 300,000 members from the 21 states included in the divestiture plan. A built-in transition period would allow current beneficiaries to familiarize themselves with their new coverage options.

Fair Trade?

Justice Department lawyers contend that Molina isn’t as strong of a carrier as Aetna or Humana, and therefore would not equally replace competition in the market.

Even Molina’s board members expressed concerns about the company’s ability to manage the new MA assets, afraid they wouldn’t have the necessary manpower. However, CFO John Molina reportedly testified that the bargain price of the assets would allow the company to acquire any extra resources needed.

Currently, CMS enrollment data shows Molina’s existing MA business covering around 100,000 people. On the other hand, Aetna and Humana served a combined 4.4 million MA beneficiaries in 2016. In fact, with more than 3.1 million members, Humana is the second-largest provider of MA plans in the country. And, if the deal goes through, the combined company would be the dominant MA plan provider in 21 states and 364 counties.

Conflicting Definitions

Anti-trust advocates worry that a merger would significantly reduce competition in the Medicare marketplace. However, the companies’ attorneys assert that the government-run Original Medicare program must be considered direct competition for Aetna and Humana’s Medicare Advantage business.

Aetna Humana Medicare Market PenetrationThe difference in wording isn’t insignificant, either. As a combined company, Aetna and Humana would control 25 percent of the Medicare Advantage market (13.4 million people). Yet, if you compare their enrollment data against the total number of Medicare eligibles (51.5 million), it’s hardly a monopoly. Aetna-Humana would hold just 8 percent of the market in that case.

The Justice Department rebutted this claim with a witness from Harvard University who reports that 78 percent of MA members remain in the program from year-to-year, and just 2 percent are likely to ever return to Original Medicare.


On the line is a $37 billion acquisition for Aetna – or a $1 billion breakup fee for Humana. If the Justice Department doesn’t approve the merger by the end of the year, Aetna will be obligated to pay Humana the breakup fee.

The Justice Department filed lawsuits challenging both the Aetna-Humana and Anthem-Cigna mergers on the same day in July of this year. The Anthem-Cigna merger is valued at roughly $48 billion, with a $1.85 billion breakup fee at stake for Cigna if the deal doesn’t receive approval by April 30.

Insurers say the mergers represent an effort to maintain negotiating power against increasingly larger provider organizations. For example, a carrier could threaten to declare a doctor or hospital out-of-network if the provider won’t accept a lower copay, thus limiting those who choose to receive care there.


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