AETNA: Could Takeover Bid Squelch Competition?
Industry analysts, doctors and others in the health care field are abuzz over WellPoint Health Networks Inc. and ING America Insurance Holdings Inc.'s $10 billion takeover bid for Aetna Inc., which, if approved, would create the largest health insurer in the nation, potentially insuring 28.3 million people. Some are worried about an increasingly narrow field of competition among HMOs. Analyst John Erb, a managed care expert at Boca Raton, Fla.-based Arthur J. Gallagher & Co., said, "Employers won't like it and consumers won't either. What we will see is less competition, higher prices and less civility from carriers," he said. Families USA head Ron Pollack agreed: "The competition that could yield higher care and lower prices diminishes and that ultimately is going to harm the institutions and the people who pay for care." Jamie Court, spokesperson for the California-based Consumers for Quality Care, said his group will petition the U.S. Justice Department to review any potential deals (Singer, Ft. Lauderdale Sun-Sentinel, 3/3). California doctors plan to do the same, according to Steve Thompson of the California Medical Association. "This deal would mean four companies would control 90% of the market in California. We need to level the playing field," he said. Currently, five million of WellPoints' 7.3 million enrollees reside in California. With Aetna under its umbrella, the firm would have access to an additional 21 million members nationwide (Appleby, USA Today, 3/3).
The Wall Street Journal reports that Aetna's board of directors plans to meet next week to discuss the offer -- sparking a 40% surge in the insurer's stock price (Gentry, et al., 3/3). However, some analysts predict that the company "may split itself up in an effort to escape" the takeover bid. John Schneider of Pimco Equity Advisors said, "It's just the beginning round. But I suspect Aetna would achieve more with an auction process for each of its three separate pieces." Breaking up the company's three core businesses -- Aetna U.S Healthcare, Aetna Retirement Service and Aetna International -- could "attract more bidders and reap a greater return than selling the company as one," he added. Schneider holds about 500,000 Aetna shares. But Bear Stearns analyst John Rex warned that while such a move might foster "additional interest in their financial business, ... you might not see additional buyers for the health care business" due to customer complaints and regulatory problems that would hinder the efforts of potential suitors like Cigna Corp. or United Healthcare Corp (Reuters/Baltimore Sun, 3/3).