Aetna Inc. is nearing an agreement to acquire Humana Inc., the second-largest provider of private Medicare insurance, for about $34 billion in cash and stock, people with knowledge of the matter said.
Aetna is close to a deal that would value its smaller rival at about $230 per share, the people said, asking not to be identified as the information is private. The companies have been locked in intense negotiations for two weeks and could announce a transaction as soon as this weekend, according to the people.
The potential acquisition comes amid a period of consolidation in the industry, with all of the five biggest health insurers looking at deals. Humana’s 3.2 million Medicare Advantage members have made it a target, since more Americans are turning 65 and becoming eligible for the health program for the elderly and its private insurer-run version.
“Medicare Advantage is a coveted space,” Michael Bernstein, a partner at Baird Capital’s U.S. private equity team who focuses on health care, said in an interview. “To develop a similar scale in Medicare would take a great deal of work and time, which would be bypassed by making that transaction happen.”
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Representatives for Aetna and Humana declined to comment.
Medicare membership is projected to rise to 68.4 million in 2023, up 26 percent from this year, according to the Centers for Medicare & Medicaid Services. Humana, based in Louisville, covers more than 14 million people through commercial, Medicare and Medicaid plans.
Some of the consolidation talk has been fueled by the Patient Protection and Affordable Care Act. Known as Obamacare, the 2010 law overhauled the U.S. health-care system with new rules that push insurers to look for savings. The law also provides subsidies to help people afford coverage, creating millions of new customers that the companies are racing to capture.
A Supreme Court ruling upholding those subsidies for more than 6 million people has helped clear the path to dealmaking. The 6-3 decision on June 25 in the King v. Burwell case said the U.S. can continue to give people money to help them buy coverage on the federal healthcare.gov website.