HARTFORD, Conn. (AP) -- Aetna will spend $37 billion to buy rival Humana in a deal that would significantly bulk up its government business and create the nation's second-largest health insurer
The cash-and-stock acquisition, announced early Friday, would make Aetna a sizeable player in the fast-growing Medicare Advantage business, which offers privately run versions of the federally funded health care program for the elderly and people with disabilities.
Humana is the nation's second-largest provider of Medicare Advantage plans. It also offers state- and federally funded Medicaid coverage and Tricare coverage for military personnel and their families.
The purchase price includes a combination of cash and stock worth about $230 per share.
The combined company may not retain its title of second-largest insurer for long. Health insurers have been pushing to consolidate for weeks, in part due to the health care overhaul's impact on the industry. Blue Cross-Blue Shield carrier Anthem has made a $47 billion offer for another insurer Cigna.
On Thursday, Medicaid coverage provider Centene announced a deal $6.3 billion deal to acquire Health Net.
Health insurers can quickly diversify their products with a big deal, and they improve their technology capabilities and can save money by combining back-office functions.