If Louisville – based Humana Inc. agrees to merge with or be acquired by another insurance company, it could take a while — years, even — for such a deal to make it through regulators, said David Dubofsky, a professor of finance at the University of Louisville College of Business.
As we’ve been reporting during the last few weeks, Humana (NYSE: HUM) is suspected to be an acquisition target by others in the industry. Last weekend, it was reported that Aetna Inc. has made an offer on Humana.
Typically, a deal such as this requires filings with both the U.S. Department of Justice and the Federal Trade Commission. Such filings are required under the Hart-Scott-Rodino Act of 1976, which allows federal officials to review information about businesses involved in a major acquisition. The companies can’t close the deal until a waiting period for federal review has passed.
Dubofsky said academic studies have illustrated that insurance premiums are higher when there are fewer players in a given market. There could be markets in the United States where Humana and Aetna control a large percentage of the insurance business.
In those instances, the companies could be forced to sell their holdings to smaller companies before a merger would be allowed. Dubofsky said states also have regulatory boards that govern insurance, so that could make a transaction take even longer to clear.
Date: June 24, 2015