Health insurance has always been big business, but it doesn’t get any smaller with every passing year. Obamacare has had its troubles, but it’s created a drive by the insurance companies that provide its services to merge. Part of this is to get in new markets, and part of this is they want to mitigate the risks of unhealthy customers. Aetna has agreed to buy Humana for $37 billion. The deal works out to be about $230 in cash and stock for current owners of Humana, roughly Aetna’s valuation at the time of the deal.
The combined forces of Aetna and Humana would make the second-largest insurance company in the United States. Anthem has recently signed a deal to acquire Cigna, another health insurance company, which might push the combined Humana/Aetna out of second place. Either way, it’s representative of the growing urgency to merge health care companies in part to cash in on the lucrative Medicare Advantage market, which is a privately-run version of the federally-funded Medicare program. Humana is the second-largest Medicare Advantage provider, and also has sizable Medicaid and Tricare businesses.
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