Health insurer Aetna Inc. is buying smaller rival Humana Inc. for about US$37 billion in the largest insurance deal in the industry.
The deal will be paid for in cash and stock and is expected to push Aetna close to the No. 2 spot held by Anthem Inc. by membership while tripling its Medicare Advantage business.
The previous largest deal was announced last week which saw Swiss property and casualty giant ACE Ltd. snap up Chubb Corp. for US$28 billion.
Reuters is reporting the M&A activity in the healthcare sector was flagged down by the US Supreme Court ruling on Obamacare, which upheld key subsidies that underpin the reform and thus gave more certainty to healthcare insurers.
The bigger the insurer, the more power it has negotiating prices and improving its doctor networks.
Anthem has offered to buy Cigna Corp to create the largest insurer in the country, toppling UnitedHealth Group Inc.
Media reports have also said UnitedHealth could be eyeing Cigna and Aetna.
On Thursday, Centene Corp. said it would buy smaller rival Health Net Inc for US$6.3 billion.
Antitrust authorities are expected to scrutinize how the combination of insurers will affect competition for each line of insurance.
Aetna and Humana are in nine of the same states in Medicare Advantage.
Combined, they would have market share of 88 percent in Kansas, 80 percent in West Virginia, 58 percent in Iowa and 51 percent in Missouri.
Aetna said the combined company is projected to have over 33 million medical members, based on memberships as of March 31.
Operating revenue is expected to be about US$115 billion this year, with approximately 56 percent from government-sponsored programs including Medicare and Medicaid.
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