Frankfort, Ky. – State legislators called Connecticut-based Aetna executives before them this week seeking a public assurance that the insurance giant still intends to keep jobs in Kentucky when it completes its $37 billion purchase of the Louisville-based Humana, according to a report from the Legislative Research Commission.
“I just want to be sure that Aetna is committed to Kentucky,” Rep. Jeff Greer, D-Brandenburg, said while chairing a meeting of the Interim Joint Committee on Banking and Insurance. “That is what we are here about.”
Fran Soistman, executive vice president of government services for Aetna, reiterated previous statements that Aetna sees no reason why it will not employee more than the current 13,000 Humana employees in Kentucky when the sale is completed. He said this would be done by placing the newly combined company’s government business – including Medicaid, Medicare and TRICARE – in Louisville.
“This is a growth business,” Soistman said. “The demographics of America is we are aging. Ten thousand of us every day are becoming eligible for Medicare. So 54 million grows to 80 million over the next 20 years.”
Aetna and Humana complement each other, he said, adding Aetna focuses on the commercial insurance business while Humana has been an expert in the Medicare Advantage program.
“The combination of these two organizations will enable us to offer consumers a broader choice of products, access to higher quality and more affordable care as well as better overall experience in more geographical locations across the country,” Soistman said. “We want to create a more simpler experience for consumers.”
He said the purchase positions Aetna to compete in the fast-growing government business.
Humana associate general counsel Joe Ventura said one of the reasons his company entertained the idea of being sold was that Aetna recognized the value Kentucky, and more specifically Louisville, brought to Humana. He was the only Humana executive who testified before the committee.
Greer said Soistman’s and Ventura’s comments were encouraging.
“I think every state has a few of their signature businesses that have been successful,” Greer said. “In our state we can talk about bourbon or we can talk about KFC but for me, and I’m in the insurance industry, I’ll talk about Humana.”
Greer then reminiscently recounted the story of about how two businessman – David A. Jones Sr. and Wendell Cherry – turned a nursing home into a healthcare giant in just three decades. As of 2014 Humana had more than 13 million customers in the United States, reported a 2013 revenue of $41.3 billion and had more than 52,000 employees. In 2013, the company ranked 73 on the Fortune 500 list, which made it the highest ranked (by revenues) company based in Kentucky.
In response to Rep. Brad Montell’s question on whether less competition would mean higher premiums, Soistman acknowledged there would be cuts at the combined company. He said premiums would be kept low through eliminating redundancies in the merged company to the tune of $1.25 billion annually by 2018.
“I just know competition keeps us honest. I know we are eliminating competition,” said Montell, R-Shelbyville. “I hope it isn’t to the detriment of the consumer.”
State Commissioner of Insurance Sharon Clark testified that her department would look at whether the merged companies would have a monopoly during Kentucky’s regulatory approval process. The combined companies would insure 33 million individuals, including Humana’s 3 million TRICARE members.
Kentucky’s regulatory review will coincide with similar reviews in the 30 other states the two companies do business in addition to the federal review. This means qualified analysis are in high demand.
“My department has already quickly acted because these types of consultant and experts are few and far between and will be in great demand,” Clark said. “We have contracted with two Ph.D. economists that specialize in health insurance mergers and market shares.”
She said her department could only reject the merger if it found Humana no longer met state licensing standards, the competition will be substantially lessened, that Aetna’s financial condition could jeopardize Humana’s financial condition, the plans for the insurers jeopardize the policy holders or that Aetna lacks competence or integrity.
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