Aetna $37-bn Humana deal to attract intense regulator scrutiny

Aetna Inc's $37-billion deal to buy smaller health insurer Humana Inc would be subject to  rigorous scrutiny by US regulators, which according to anti-trust experts, could also make other large-scale mergers in the sector more difficult.

With the deal set to become the largest tie-up among health insurers, the announcement would start the clock on an examination by regulators of whether consumers would be hurt by diminished competition.

Besides the Department of Justice, competition regulators would include various state-level agencies.

The deal comes after intense discussions extending over weeks about potential combinations among the five biggest US health insurers - Aetna, Humana, Cigna Corp, Anthem Inc and UnitedHealth Group.

Insurers seek more leverage in a healthcare system that had seen major consolidation among hospitals and doctor practices, as also mergers between medical device makers and other suppliers.

The cost of new drugs had increased and president Barack Obama's healthcare law had made it harder for insurers to pass on higher costs to customers.

Anthem last month, offered to acquire Cigna for  $47 billion, and the alliance would have surpassed UnitedHealth to become the single largest US health insurer.

Cigna, which had also considered acquisition of Humana, had so far rejected the buyout approach, even as some industry experts had expected a potential buyout of Cigna to be revived after Aetna's deal.

According to analysts, M&A activity in the healthcare sector had been waiting for the ruling of the Supreme Court on Obamacare, which last week, upheld key subsidies that underpinned the reform and thus gave more certainty to healthcare insurers.

It was known that the bigger the insurer, the more power it had to negotiate prices and even improve its doctor networks.

Reports from media on Thursday further said UnitedHealth could be eyeing Cigna and Aetna. Meanwhile, Centene Corp said it would buy smaller rival Health Net Inc for $6.3 billion.