A California health insurance official signed off on Hartford, Conn.-based Aetna's $37 billion merger with Louisville, Ky.-based Humana after reaching an agreement with Aetna for certain conditions, California Healthline reported.
Although Shelley Rouillard, Director of the California Department of Managed Health, criticized Aetna's 21 percent premium increases for small employers in 2015, she reached an agreement with Aetna for the merged entity to abide by certain conditions. If the merger goes through, Aetna must brim small group premium increases and undergo greater state oversight of its rates. In addition, Aetna would be required to invest in health initiatives and house decision-making functions in California.
The agreement does not ban Aetna from increasing premiums even if the department opposes them, though if the merger succeeds, Aetna said it would not increase rates for a short period. In addition, rate increases would need to be filed 90 days prior to effective dates, up from 60 days, according to California Healthline.
State Insurance Commissioner Dave Jones has not announced his decision on the Aetna-Humana merger. However, Ms. Rouillard's announcement comes on the heels of Mr. Jones imploring the U.S. Department of Justice last Thursday to halt a proposed $54 billion merger between Indianapolis-based Anthem and Bloomfield, Conn.-based Cigna.
Both mergers were announced around the same time last summer, as neither payer wished to be left without a partner, Bloomberg reported. Antitrust regulators expressed Monday they doubted the Anthem-Cigna merger would succeed. This places the odds in favor of the smaller Aetna-Humana merger receiving DOJ approval, Bloomberg reported.
If it succeeds, the combined entity of Aetna-Humana would represent the largest Medicare Advantage insurer, according to Bloomberg. While neither Aetna nor Humana sell polices on the California exchange, Aetna executives said the acquisition should save $1.25 billion in savings by 2018, increasing in following years.
Aetna said California's approval is the "latest positive step" for a merger with Humana and hopes to complete the acquisition by the second half of 2016.
State regulators do not have the authority to block mergers, but state's decisions do influence the Department of Justice, which has the final say on the deal.