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What the Aetna-Humana Deal Could Mean For Louisville

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If Aetna's plan to purchase Humana becomes official, what was Louisville's largest standalone publicly traded company by revenue will cease to exist as the city has known it.

What would this mean for Louisville? Humana employs more than 12,000 residents in the Louisville area; its foundation is a philanthropic pillar in the community.

City and state officials on Friday said it's too early to say for certain what the deal will mean for the region. Mayor Greg Fischer offered optimistic speculation on the news of the Aetna-Humana deal.

But optimism isn't shared universally across Louisville.

"Probably it's going to be a bad deal for Louisville, for Humana workers, for other companies that do business with Humana," said David Dubofsky, a finance professor at the University of Louisville.

There is "a tiny possibility" the merged company could move its headquarters to Louisville, Dubofsky said. More likely, Aetna will use the prospect of moving to Louisville as leverage to ease its tax burden in Connecticut.

He said layoffs are likely, though it's too early to gauge the breadth of any job loss.

“The way companies create efficiencies when they combine is that they have two people doing the same job for two different companies, with one company you only need one person doing that job, so one of those two people is going to lose his or her job,” he said.

On the other hand, Fischer said "it's very fair to speculate that this will lead to more jobs."

He said some details of the deal, like the fact that 56 percent of the merged company's revenue will be based in Louisville via its Medicaid, Medicare and TRICARE sectors,  leads him to believe Louisville and the merged company are poised for growth.

"That's larger in revenue that what Humana is today," he said.

Fischer said the Humana Foundation, the nonprofit philanthropic arm of the company, will remain in Louisville.

City and state officials will actively compete to bring the merged company's headquarters to Louisville, Fischer said.

If that were possible, Louisville would retain jobs and potentially gain them, too.

"That's when the mayor and the state will engage with working with (Aetna) on future incentives," said Larry Hayes, secretary for the Kentucky Cabinet on Economic Development.

Hayes didn't speculate on what those incentives could look like.

"This is a business transaction that will take place over time, there are a lot of unknowns," Hayes added.

He said the deal still is subject to federal approval. It's not likely to close for at least another year.

The Department of Justice is also expected to closely examine mergers of large healthcare companies, The Wall Street Journal  reported last month. The heightened scrutiny of any healthcare company merger comes amid concerns that industry consolidation will stifle competition and impact local and regional markets, the newspaper reported.

 

Jacob Ryan joined LPM in 2014. Ryan is originally from Eddyville, Kentucky. Email Jacob at jryan@lpm.org.