Mark Bertolini, chief executive of Aetna Inc., has told investor analysts that the health insurer is developing an alternative plan in case its pending $37 billion acquisition of Humana Inc. collapses.
Bertolini didn’t provide specifics to analysts on a conference call Tuesday as Aetna released its second-quarter financial results.
“We believe we’re going to get the deal done but it would be irresponsible for us not to have a plan B in place and understand all the levers we can pull,” he said in response to a question from an analyst.
Aetna has reviewed the “financial aspects” of the plan with its board of directors, but has not completed “all the various market impacts,” growth rates and other related factors, he said.
Bertolini has made the Humana deal a priority. It would give Aetna a broad reach into Humana’s Medicare Advantage markets with its millions of senior citizens.
“The Humana combination allows us to get at certain assets and certain markets sooner than we otherwise would if we had to build it or buy it in other ways,” Bertolini told analysts.
The U.S. Department of Justice is going to court to block the deal and a separate $54 billion acquisition of Cigna Corp. by Anthem Inc. The Obama administration argues that the deals are anti-competitive and would reduce consumer choice.
Aetna insists its Humana acquisition would expand offerings to more areas and create more choices for consumers.
Aetna and Humana announced Tuesday they are selling $117 million in Medicare Advantage business to Molina Healthcare Inc. of Long Beach, Calif., to address criticism that the deal is anti-competitive.
“We don’t believe divestitures should be required at all,” Bertolini said.
Jefferies analyst David Windley said in a note to investors he was surprised that the proposed Medicare Advantage divestitures were smaller than he expected. “This solution seems more risky than other options we thought Aetna could take,” he said.
Windley also said Molina Healthcare has a “relatively small Medicare Advantage footprint.”
Analysts questioned Aetna management about the sale. One analyst asked what Aetna would do to help Molina overcome its “relative lack of experience in Medicare Advantage.”
Shawn M. Guertin, Aetna’s executive vice president and chief financial officer, said the sale would include “network continuity” to prevent interruptions in customer service and to give Molina time to ramp up to take over the business.
Molina has some experience in Medicare Advantage, but Aetna still considered ways to make sure a transition goes as “smoothly as possible,” he said.
Aetna’s shares ended the day up 1 percent, to $116.90.
Date: July 04, 2016