Justice Dept. has concerns over Aetna-Humana deal: source

Thu Jul 7, 2016 5:36pm EDT
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By Caroline Humer and Diane Bartz

(Reuters) - The U.S. Department of Justice has significant concerns about Aetna Inc's (AET.N: Quote) proposed acquisition of health insurer Humana Inc (HUM.N: Quote), a source familiar with the situation said on Thursday, sending shares of Humana down as much as 11 percent.

Aetna's purchase of Humana would combine two of the largest providers of Medicare Advantage plans for elderly people, and investors have long been concerned the deal might pose a competition issue for antitrust regulators.

The Justice Department is also reviewing Anthem Inc's (ANTM.N: Quote) proposed purchase of Cigna Corp (CI.N: Quote), and investors are worried it will fail because of its impact on competition in the employer insurance market. Together, the two deals would decrease the number of national health insurers to three from five.

The Justice Department's significant concerns come as the department is due to meet with officials from Aetna and Humana on Friday, as first reported by antitrust trade publication MLex.

The source, who was not authorized to speak publicly about the matter, confirmed the department's concerns but did not expound on the exact nature of its worries. It was not immediately clear if they were enough to derail the deal.

Reuters reported last week that Aetna had begun a process to divest about $1 billion of Medicare Advantage assets to address antitrust concerns.

Ana Gupte, an analyst at Leerink Partners, said by email that she continues to believe that there is an 80 percent chance that the Aetna-Humana deal will close.

"In our view, Aetna and Humana continue to have productive dialog with the DOJ. They have embarked on a process of asset sales to address specific antitrust concerns from the DOJ," Gupte said. Gupte has said that chances of Anthem and Cigna closing are less than 50 percent.   Continued...

A trader points up at a display on the floor of the New York Stock Exchange August 20, 2012. Health insurer Aetna Inc said on Monday that it would buy rival Coventry Health Care Inc for $5.6 billion to increase its share of the fast-growing, U.S. government-backed Medicare and Medicaid programs. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS HEALTH LOGO) - RTR36ZMH