BY CARL O'DONNELL AND CAROLINE HUMER
(REUTERS) WellCare Health Plans Inc (WCG.N) and Centene Corp (CNC.N) have made competing offers for the Medicare Advantage insurance plans that Aetna Inc (AET.N) looks to shed in seeking clearance for its acquisition of Humana Inc (HUM.N), people familiar with the matter said.
The potential divestiture is a central pillar of Aetna's efforts to win over regulators for its $34-billion Humana deal. The health insurer met U.S. Department of Justice officials on Friday in a bid to address their antitrust concerns.
WellCare and Centene submitted bids this week for a portfolio of Aetna's Medicare Advantage plans that covers around 350,000 patients, the people said.
Wall Street analysts have said that for Aetna to appease antitrust concerns, the company would need to sell Medicare Advantage plans in geographies where combined market share is greater than 35 percent. Aetna and Humana combined will still have more than 4 million Medicare Advantage customers if the deal goes through, making it one of the largest players.
Overlap in other parts of the companies' businesses is small. Aetna, the third largest health insurer, sells individual, small business and large corporate plans as well as other government plans, while two-thirds of Humana's business is Medicare Advantage.
Reuters first reported earlier in July that Aetna had launched the sale of the Medicare Advantage portfolio, which has a $2.5-billion book of business and could be valued at around $1 billion.
The portfolio has also attracted interest from other companies, and there is no certainty that WellCare or Centene will prevail should Aetna go ahead with the divestiture, the people cautioned.
The sources asked not to be identified because the deliberations are confidential. Aetna declined to provide any comment, while Humana and WellCare did not immediately respond to requests for comment.
"It is Centene's policy not to comment on rumors," a Centene spokeswoman said in an emailed statement. "Additionally, it is a long-term policy of Centene not to participate in auctions."
The potential deal would more than double the size of WellCare's and Centene's Medicare businesses.
WellCare, which primarily sells Medicaid plans, had 326,000 members in Medicare Advantage plans at the end of March, including in Florida, New York, Georgia, Texas, California and Mississippi.
Centene had 303,000 members in Medicare plans, including Medicare Advantage and new pilot programs serving those eligible for both Medicare and Medicaid. Centene closed on an acquisition of Health Net this year.
The U.S. Department of Justice has simultaneously been scrutinizing Anthem Inc's ANTHM.N acquisition of Cigna Corp (CI.N). Both deals were announced within a month of one another last summer.
If both deals were to be approved, the number of national health insurance companies would shrink to three from five. Some doctors, hospitals and consumers fear the deals could lead to higher premiums for patients and lower payouts to healthcare providers.
The companies have argued they need to merge in order to bring down medical costs for consumers.
So far this year, regulators and government departments have treated large deals with a heavy hand, effectively shooting down the planned mergers of Pfizer Inc (PFE.N) and Allergan Plc (AGN.N), Halliburton Co's (HAL.N) and Baker Hughes Inc (BHI.N), and Staples Inc (SPLS.O) and Office Depot Inc (ODP.O).