Seeking sales and scale from selling to seniors
Aetna CEO Mark Bertolini rang in the new year by pulling the company out of America’s Health Insurance Plans, the industry’s largest trade group. He chose to go it alone at a pivotal time. The insurer’s traditional business is based on selling plans to employers. But last year Aetna set its sights on becoming a Medicare Advantage behemoth. This year will determine if Bertolini can pull it off.
Aetna won the bidding war last July to acquire Louisville, Ky.-based Humana in a $37 billion deal. Bertolini, who beat out Cigna Corp. CEO David Cordani, has been straightforward in his reasoning. Humana is one of the largest Medicare Advantage insurers in the country, and Aetna wants to become the premier name for seniors who want private Medicare coverage, an increasingly lucrative business for insurers.
Bertolini indirectly signaled it wouldn’t take much for merger mania to hit the insurance sector when he told the J.P. Morgan Healthcare Conference in San Francisco last January that “it’ll take one transaction to tip the whole thing off.” The subsequent wheeling and dealing consumed the big five insurers during the first half of 2015.
If regulators approve the deal, the Humana transaction will open the door for Bertolini to convert Aetna into a “healthcare services” company by building up its pharmacy and data-analytics businesses.
Bertolini made a major statement last year when he raised the minimum wage of Aetna employees to $16 an hour. He is confident that the U.S. Justice Department and state insurance regulators will back the Humana deal this summer.
Yet members of Congress have been leery about the effects of industry consolidation. And while antitrust experts are divided on its economic impact, regulators appointed by the lame-duck Obama administration may side with consumer groups who oppose the deal.
Beyond Medicare, Aetna also will grow its individual exchange presence to more than 1.4 million people by completing the Humana acquisition. Bertolini has pressured the Obama administration to drop several insurance proposals for 2017, including one that would standardize exchange plans. He continues to express faith in the new marketplaces despite the industry’s broader angst. “We think it’s way too early to call it quits,” he said last year.
“Our savings will be passed along in the price of our product.”
—Bertolini’s congressional testimony on the proposed Humana merger, September 2015
Mark Bertolini Position
Chairman and CEO
Tenure Five years as CEO, 12-plus years at Aetna